Show Me The Money! Sources of Funding for Real Estate

It surprised me that this post did not attract more attention. then I realized that perhaps the title did not really convey the message. There is at least one major A-Ha! moment in the post above for many new investors, so I'm adding this post to bump the information to the top in hopes that those who need to find this information will be able to do so. I have also made one other change, which you will notice at the bottom of each of my posts. I've provided a direct link to my blog on this forum, in which I am re-posting those articles that I personally feel have the greatest informational content for readers. I will add to this "Best of" blog as I find information that I find most applicable.
Please realize that I spend each day on the phone assisting people who are experiencing a lot of the same obstacles that you may be facing as an Official Trainer/Coach with the Dean Graziosi program. We sincerely care about your success, and I do all I can from a writing standpoint to supply as much information for your benefit as possible.
I also want to acknowledge many many other people who post on this blog who have the same approach and attitude. Some of them are also official coaches that I work with, others are among those who have the highest number of posts on the blog. These are dedicated people who, I believe, have learned one of the greatest lessons of life, called simply "Giving Back!" Please let these people know that you appreciate what they offer, as do I. It will warm their hearts, and yours. And a Gratitude Attitude is one of the keys to experiencing true success in life. Best wishes for your success in all you do!

This might be off topic but what can I do when my agent insists on providing a pre-approval letter from James who is part of Link source management. I'm trying to place an offer on a REO package deal but he won't proceed unless I send him this letter. I decided that since he is not doing what I'm telling him to do, he will be replaced but I will like to know if there is another way to handle this scenario?

Thank you

Gildardo

I for one will look into it! Thanks!

In response to your post, have your agent (who is supposed to be working for you, not questioning and cross-examining you) call the link source management number. There is one person who responds to those calls, who will verbally confirm that the account holder of your VOD is, in fact a cash partner of yours, and that the statement of account is real and current. I would not expect an additional letter to be sent.
Your agent's role is to represent you, and to forward information that you provide to other people--NOT TO BLOCK YOU. In my estimation, this agent should be drop-kicked, and an agent who actually IS investor friendly substituted. My own personal method of finding such an agent would be to find a Real Estate Investor's association near you, call the contact person, and ask the following: "I am new to investing in this particular area and am looking for a good investor-friendly agent to work with. Do you have any real estate agents who attend your meetings who are looking to build new business that you can connect me with?" If there is any one place to find an investor friendly agent, it should be at a club consisting of real estate investors.

Hello Dwall I hope you know that you are one of my favorite Dean success Coach and I love the way you pour out your knowledge on DG.com:)

I appreciate your time for putting everything into a collection of your "BEST OF"blog so I can review them any time.

I'm pretty much familiar with lease option type of seller financing BUT I got some great questions for you in regards to your types of seller financing techniques which you shared in the above post.

1) I would love to be making offers on seller financing properties as well but my exit strategy plan will be to use a lease option tenant buyer option fee to cover my downpayment (1-5%) between me and the seller and sell via lease option. ...Can this be possible? If so, Could you please explain?

2) Could you please share with me some good terms such as interest rate, ballon payment mortgage, and a good years of amortization which I could make an offer on an owner/seller financing property in terms using Subject To," where title is transferred at the beginning, and a wrap-around mortgage is created between the buyer and the seller.

3) When a seller is not open to lease option type of seller financing, which one is more of a low-risk safe type of seller financing, is it Subject To," where title is transferred at the beginning, and a wrap-around mortgage is created between the buyer and the seller; or "Land Contract" where a purchase contract is modified to be in force for a lengthy term, payments are made during the contract phase?

4) Could you please elaborate more on "Land Contract" where a purchase contract is modified to be in force for a lengthy term, payments are made during the contract phase?

5) I know what a land trust means but is it the same thing as a "land contract"?

6) Can I use the below exit strategy when making offers on seller financing properties:
-Downpayment is to be paid after meeting inspection and partner contingencies within 14 or 21 business days
AND
Could you please share with me some exit clauses which I could use?

7) How am I suppose to do my numbers OR how do I know my numbers are right when making an offer on a seller financing property?

Assume I make an offer on a seller financing property on MLS, how do the listing and buyer agent get paid?

Thank you so much in advance and I glad to look forward to reading back from you.

Thank you so much Dallin! I will replace my agent by fallowing your steps tomorrow

TC, I think that the questions you have asked can provide some good content for everyone, so I'll do my best to diligently answer those questions, but will probably have to do so in installments--I'm expecting a busy day today.

TC:
1) I would love to be making offers on seller financing properties as well but my exit strategy plan will be to use a lease option tenant buyer option fee to cover my downpayment (1-5%) between me and the seller and sell via lease option. ...Can this be possible? If so, Could you please explain?

Response:
I prefer using lease option both as an acquisition technique and as an offering technique. My objective with the seller is to keep the option consideration (similar to down payment) at 1 to 3%, and offer to the tenant/buyer with a 3 to 6% option consideration. The spread, or margin is your profit margin, and option consideration is non-refundable. It is possible to blend different types of seller finance arrangements in a sandwich type transaction, but it is easier to align them and ensure your profit margins.

TC:
2) Could you please share with me some good terms such as interest rate, ballon payment mortgage, and a good years of amortization which I could make an offer on an owner/seller financing property in terms using Subject To," where title is transferred at the beginning, and a wrap-around mortgage is created between the buyer and the seller.

Response:
First, I'd like to refer everyone to my posts under Dodd/Frank Act--An Investors Perspective, which discusses some legitimate concerns in using seller finance with a consumer (owner/occupant). I have concluded that I will not offer any seller finance choice other than lease option when I offer a property to a consumer. To find these posts, follow my link below to my blog, which contains the first installment on Dodd/Frank, and a link to the other installments.
On the seller side, however, where we are the not an owner/occupant, there are no new restrictions, so a person can use whatever method of seller finance they choose. Typical arrangements include an interest rate that is a little above standard residential loan rates, maybe 1% above. A common time period for balloon is 5 years, although it can certainly vary from that. Amortizations are determined by what would be an affordable payment, and sometimes a portion of the payment or interest is deferred in order for the buyer to be able to produce a positive cash flow.

TC:
3) When a seller is not open to lease option type of seller financing, which one is more of a low-risk safe type of seller financing, is it Subject To," where title is transferred at the beginning, and a wrap-around mortgage is created between the buyer and the seller; or "Land Contract" where a purchase contract is modified to be in force for a lengthy term, payments are made during the contract phase?

Response:
I always propose a lease option arrangement to the seller, I prefer those, and feel that they offer the most open and easily modifiable arrangement. If a seller is not open to lease option, I will propose either subject to or land contract, depending on whether the seller is really anxious to just clear away involvement with the property (subject to) or is protective of the property, and still wants some involvement (land contract). Sometimes they simply state what they would like to do and we structure accordingly.

TC:
4) Could you please elaborate more on "Land Contract" where a purchase contract is modified to be in force for a lengthy term, payments are made during the contract phase?

Response:
A Land Contract, or Contract for Deed, or Agreement for Deed, or Articles of Agreement (all names for same arrangement)is the same contract as what we use to place a property under contract for purchase. The difference is that we will not be having a closing within 30 to 60 days, it will probably be extended to a 3 year, 5 year, 7 year, 10 year, etc. arrangement.
As a consequence of the length of time, additional clauses need to be included that would be common in a lease agreement, such as who is going to handle the repairs, pay the utilities, care for the yard and property, etc., during this multi-year arrangement. A land contract combines the instructions for closing along with the agreement for day to day usage of the property until the closing takes place.

TC:
5) I know what a land trust means but is it the same thing as a "land contract"?

Response:
I believe I explained the essence of a land contract above, but for those who are unfamiliar with land trusts, briefly, it is a method of ownership for properties that operates a little like a living trust, with a trustee, and beneficiaries. It provides asset protection benefits of privacy and separation, and, if the beneficiary is the same as the grantor of the trust, is not classified as a transfer of ownership that incurs transfer taxes. And it actually changes the ownership of the property from realty to personalty (meaning it is personal property). Land trusts are not the same as placing a property into a business, but do accrue certain tax benefits.

TC:
6) Can I use the below exit strategy when making offers on seller financing properties:
-Downpayment is to be paid after meeting inspection and partner contingencies within 14 or 21 business days
AND
Could you please share with me some exit clauses which I could use?

Response:
When setting up seller finance transactions, I typically make an offer that includes a time period of between 2 and 4 weeks before assuming physical and financial responsibility and allows for further investigation of the property. In a lease option, the clause would read something like this:

"Optionee shall assume physical and financial responsibility for property in 14 business days following the execution (signing) of this agreement, and the remaining balance of option consideration and first monthly payment shall be due at that time. During the period prior to assumption of responsibility, optionee shall be given reasonable access to property for further inspection. This agreement subject to a satisfactory full inspection of property by optionee and/or associates within 14 business days following acceptance of agreement."

TC:
7) How am I suppose to do my numbers OR how do I know my numbers are right when making an offer on a seller financing property?

Response:
As with any long-term arrangement regarding a property, the numbers are based essentially on a cash flow analysis of the property to make sure that it produces income on a monthly basis. You also want to calculate your cash on cash return on investment.
If the property is to be done in a "sandwich" type arrangement where you have one agreement for purchase and sale of property with a seller, and another with a buyer, then you need to examine your margins on the following items: option consideration/downpayment, monthly payment, purchase price, and length or term of agreement.

TC:
Assume I make an offer on a seller financing property on MLS, how do the listing and buyer agent get paid?

Response:
This is an interesting point, and is also the reason that I look for seller finance opportunities primarily from properties for rent and FSBO listings.
Agents are not entitled to receive a commission until closing and transfer of title. In a Subject to arrangement, this happens at the beginning, so the agents are happy.
But in a land contract or lease option, the official closing on the property could take place in a year, or 5 years, or longer. They would still be entitled to any obligated commissions from the seller, but would have to wait. You can see how that might not settle very well.
It is possible to arrange for them to receive additional compensation, such as a percentage of monthly payments received by you, as an inducement to want to work with you on these types of deals. I've tried that a little, but prefer to avoid that added complexity, so again, I focus mostly on rental and FSBO properties for making these types of offers.

I appreciate your time answering my questions. You are awesome!

I had to save this so I can review them again. LOTS of great information` which you shared.

God bless you and good luck in your investing!

Thanks TC, glad to be of help.
As I look back over this information on Seller Finance, it occurs to me that I need to make sure that those who are considering its use know that as you begin to use it as an offering technique, it may limit your ability to acquire properties using conventional loans. The reason for this is that we are agreeing to accept payments over time in order to increase the money we make, rather than taking a lesser amount of money as an all cash settlement. It's important to be aware of this as you use this technique.
Of course, there is a kind of addictive aspect of using seller finance as an acquisition technique that makes you want to dig and search for deals that can be done with very minimal out of pocket investment. It's hard to justify in your mind making a 20-30% down payment when you just purchased several other properties with less than 5% out of pocket.
I just wanted to make everyone aware of something that may be considered by some as an impediment to progress, while for others it is simply a way to maximize your return on investment when selling a property.

The info was great keep up the good work join deans diamond syndication group

P.s.
god bless.