IS IT CRAZY TO SELLER FINANCE YOUR RENTALS—OR CRAZY NOT TO?

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By Eddie Speed

IS IT CRAZY TO SELLER FINANCE YOUR RENTALS—OR CRAZY NOT TO?

We’re now in a note cycle. It’s as obvious to a note guy like me as when an oil guy hits a gusher.

I’ve been a note guy since 1980. As anyone in any phase of real estate knows, the market is constantly changing and evolving. We either change with it or get left behind. I can say from experience that what worked in one decade wouldn’t work in the next. And so on for the next, and the next, and the next.

Which leads us to 2023. We’re seeing a market phenomenon that’s producing a phenomenal opportunity.

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I’ve lived through cycles where owning rental properties made a lot of sense financially. But in today’s market, not as much. You owe it to yourself to test your investment strategy. Run the numbers and compare the profit potential of owning rentals versus selling your rentals with seller financing. Because of today’s high home prices and mortgage rates, I predict you’ll discover it makes more sense to be the bank (with NO expenses like taxes, repairs or insurance) instead of being the landlord (paying ALL those expenses). I bet you’ll also realize how much more income you’ll bring in every month by seller financing instead of renting.

HERE’S WHY NOW IS THE TIME FOR SELLER FINANCING

If you’ve ever dropped a coin into a slot machine, your eyes would pop out if all the dials lined up. Well, when it comes to dropping some money on an investment, all the dials are lining up on seller financing—especially in regions of the country where rents have dropped significantly. Here are some of the factors we’re seeing in today’s market:

• RENTAL HOUSE AFFORDABILITY The cost of buying a potential rental house is the highest since at least 1996. If you get a mortgage around 8%, and pay an inflated price due to the pandemic, you’ll pay 60% more than buying the same house three years ago. This makes it very challenging to scale up your rental business. On the other hand, if you sell your rental houses now with seller financing, you’ll get substantially more than three years ago. And you’ll be getting double or triple the interest now than you would have gotten three years ago.

• INCREASES IN RENT ARE WAY BELOW INCREASES IN PRICE Averaging all US markets together, the cost of buying a house is up 60%, but rents have risen only 22% during the same 3-year period. In many markets (mainly in the western half of the country), rents have declined since last year.

• SOFTER DEMAND FOR RENTAL PROPERTIES A glut of newly built apartments is depressing rent growth. And according to the St. Louis Federal Reserve, an additional one million units currently under construction will hit the market soon. Fannie Mae predicts vacancy rates in multifamily buildings will reach 6.25% in 2024, which exceeds the 15-year average of 5.8%. Apartment stocks are underperforming. To avoid vacancies, apartments lower the rent which depresses rental income for landlords.

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• CREDIT AVAILABILITY Underwriting standards have changed drastically because of the covid pandemic. Traditional lenders arenow hurting from over two million delinquent home loans. Money from banks and mortgage companies has gotten tighter and tighter, putting eager buyers—even ones with steady jobs and solid credit—in the penalty box. The mortgage credit availability index stood at 96.3 in October, 2023; which is about half what it was three years ago. Well-qualified homebuyers are getting turned down by traditional lenders; driving them right into the arms of seller financing.

• HOME APPRECIATION HAS LEVELED OFF Even though home prices shot up during the pandemic, prices aren’t maintaining the same trajectory. They’ve hit a plateau. Goldman Sachs expects home prices and mortgage rates to increase only 1.7% in the next year. That’s not just flat, that’s “stand on a brick and see fifty miles flat.” Now’s the time to sell your rental portfolio at top dollar and cash out before home prices stagnate.

• TAX ADVANTAGES When you sell a rental property that has greatly appreciated, you’ll owe a bundle in capital gains taxes. But if you take the profit over time through seller financing, the Internal Revenue Service allows you to spread out the gains using the “Installment Sales Method.” This technique has allowed countless sellers to pay no capital gains taxes at all. Of course, there’s always the possibility the IRS could close this loophole in the future, so better take advantage of it now.

YOU CAN MAKE MORE THAN DOUBLE THE MONTHLY INCOME FROM SELLER FINANCING THAN LANDLORDING

Today’s home prices and interest rates are both elevated. So when you sell your rental with seller financing, the monthly mortgage payment you receive will be much larger than your monthly rent check.

In the rental world, there’s the “50% Rule” (also what they call “The Magic Number”). It means 50% of rental income goes toward expenses. If the rent checks you get don’t surpass the 50% Rule—after paying taxes, repairs, and insurance—you’ll lose money. But as a note owner in today’s market—who DOESN’T pay taxes, repairs, and insurance—even a mediocre note would easily beat the 50% Rule of profitability. And with today’s high interest rates being paid TO you instead of BY you, the checks you get every month could be lots more than you get from rent.

GET YOUR APPRECIATION NOW INSTEAD OF YEARS FROM NOW

A frequent objection people raise when they compare note investing to landlording is that when you own a rental house, the property appreciates over time. It’s a fair question that deserves a fair answer.

As long as the rental property is kept in good repair, and the neighborhood doesn’t decline, its value should increase over the years until you decide to sell it. But let’s say there are two investors; one buys a rental property, the other buys a note, and both pay the same amount. Over ten years, the note investor makes double the monthly income compared to the landlord who pays taxes, insurance, and repairs for ten years. If the landlord sells the property after ten years, he gets the appreciation—but the rent checks stop (unless he sells with seller financing). As for the note investor, after ten years he still has twenty more years of payments coming!

Even if the landlord’s rental house appreciates roughly 10% a year, fire up your calculator and you’ll see how much more the note investor makes over the life of their investments.

THEN THERE’S THE HEADACHE FACTOR

Lots of landlords think they’re getting an investment, but it turns into a job. You have to deal with showings, repairs, and midnight calls from tenants to fix a leaky hot water heater. But when you own the note, repairs are the homeowner’s headaches. Every investor who has transitioned from landlording to seller financing will agree: You can own a thousand notes for the same amount of work as owning a hundred rentals.

If the note investor’s homeowner stops paying, your investment is completely collateralized by the property. But if the landlord’s tenant stops paying, good luck collecting the back rent.

ARE YOU READY TO TURN THE CORNER ON YOUR CAREER?

It’s been said that “Timing is to investments what location is to real estate.” The time is now and the door is wide open for you to consider selling your rental properties with seller financed notes. Don’t keep doing things the same way as always, and don’t look past this tremendous window of opportunity to boost your net worth like never before.

Learning the tools of seller financing and note creation will open up a whole new world of monthly cashflow and wealth-building—and we make it surprisingly easy at NoteSchool. The first step is to take my free 2-hour Master Class where you’ll be introduced to the lucrative world of notes. Just visit: NoteSchool.com/EddieMasterClass

Eddie Speed: Author, Teacher, Innovator, Visionary

Eddie grew up around horses, but in 1980 he learned there’s more wealth to be built with a pencil than a rope. That’s when his father-in-law, a pioneer of seller financed notes, taught him the ropes of the note business. Eddie has been perfecting his craft ever since, introducing creative innovations that changed the way note investing is done.

As the nation’s most experienced note buyer, he has closed over 50,000 note deals. He launched NoteSchool in 2000, where anyone can learn the art of creative financing for performing and non-performing discounted mortgage notes. He is the owner and president of Colonial Funding Group LLC, which acquires and brokers discounted real estate secured notes, and he’s a principal in a family of Private Equity funds that acquire bulk note portfolios.

Thousands of NoteSchool students have testified to the wealth building, life-changing power of his tried-and-true, data-driven approach to note investing.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411Expo.com or our Eventbrite landing page, CLICK HERE.

Creative Financing Options

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By Tod Snodgrass

https://creativetransactionfunding.com

Whether you are an experienced Real Estate Investor (REIer) or are a newbie in this industry, there exist many innovative funding techniques you can use to finance current and future deals. Generally referred to as creative financing, these terms refer to alternative or unconventional approaches that REIers may choose to utilize to acquire investment properties, using OPM: Other People’s Money.

In today’s unpredictable real estate investor landscape, it is very important to have a range of funding options at the ready before you dive into a property investment deal. Let’s face it, to be a successful REIer takes money. It does not necessarily have to be YOUR money, but before you can successfully pull off a deal, chances are SOMEONE’s funds are going to have to be brought to the table. Plan ahead. Line up funds before you need them because they have to come from somewhere.

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Make sure, before you commit to any real estate deal, that you have all your web-footed waterfowl neatly arranged in a linear fashion.

A. Lease Option: You may encounter a situation where you are not ready yet (either experience- or financial-wise) to purchase a property, either for your own personal use or as an investor. That is where the lease option can work best. Doing so provides the opportunity to purchase a property at the conclusion of a pre-arranged leasing-type agreement. This approach allows you to potentially build up equity through monthly rent payments.

The landlord benefits by earning monthly revenue. Typically, and depending on specific contract terms, a portion of the monthly rent payment is credited toward the future down payment on the house. This technique normally works best in a buyer’s market.

B. Down Payment Assistance (DPA). Many REIers are finding themselves caught in a new type of financial squeeze when it comes to the percentage of the purchase price that hard money and private lenders require that they bring to closing, i.e. “Skin-In-The-Game” (SITG) cash.

Until recently, it was possible to secure, say a 90% loan from such lenders, with the borrower required to contribute the other 10% as their SITG capital. And while those terms are still available in some cases, many REIers are waking up to a new reality: They need to bring closer to 20%-30% SITG cash to closing in terms of actual down payment money, with a general average of around 25% DP money currently required.

Upping the SITG percentage is a risk-reduction strategy employed by lenders in response to what they perceive as new uncertainties in the real estate investment marketplace, on a go-forward basis. The reality for REIers caught in this new “liquidity squeeze” is that they now may need to potentially come up with tens of thousands or even hundreds of thousands in new (SITG) investment capital above what was previously required.

Without new SITG capital, the REIer cannot close on the deal. A potential solution to this new dilemma is what we refer to as “Down Payment Assistance (equity) funding”: This is where a third party provides the needed extra SITG/DP cash in return for a modest share of the profits. See below for info about DPA.

C. Seller carryback loan. Plainly speaking, this is simply owner-provided financing. The seller acts as the lender or bank, i.e. he carries a mortgage–usually a second position loan–on the property and collects monthly payments from the buyer. Such an arrangement can be a win-win for both the buyer and the seller. Often the buyer (an REIer in this case) may be willing to pay more than the asking price in trade for advantageous loan terms on a seller carryback mortgage.

Further, the buyer is often willing to pay a higher interest rate on the seller carryback loan than the seller could earn from a CD from their local bank. Also, should the buyer default, the (previous) seller can always initiate foreclosure action and take the house back from the second position. The buyer benefits since they don’t have to go through the arduous and time-consuming chore of trying to get a bank loan; this is especially true if the buyer has a low FICO score or other credit or background issues.

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D. Buying a property “Subject-To”. What this means is that the REIer essentially takes over the seller’s remaining mortgage balance (thereby effectively “assuming the loan”) without making it official with the lender. This is a popular strategy among REIers, especially in an era of rising interest rates, since the loan being assumed probably carries a lower interest rate compared to a new (bank) loan.

Savvy REIers often employ the Subject-To method to take the place of a hard money loan. However, most REIers limit the use of Subject-To loans to relatively short-term time frames, i.e. for a few months until the REIer can either refi the loan or sell the property as part of a fix-flip strategy.

E. Hard Money: A hard money loan refers to asset-based financing where the borrower receives funds that are secured by real property. In most cases, private investors are the biggest suppliers of hard money capital, which are then funneled through hard money brokers.

While the terms (interest rate, points, time frames) of hard money loans may vary, there are several common characteristics: they are usually easier to obtain vs. a conventional bank loan; credit scores and income verification are not as important as the asset value involved; they are usually for shorter time frames (say for 6-24 months); while they charge higher interest rates, the good news is that they often can fund pretty quickly if the deal is right. They usually focus on the ARV (After Repair Value) to determine the loan terms, including important factors such as the rehab blueprints, scope of work, etc. They usually prefer to work with experienced rehabbers who have a clear plan to repay the loan within the specified time frame.

F. Cross collateral loan. This REI method assumes you already own a rental property free and clear. You want to buy another rental property. A cross collateral loan allows you to use the 100% equity in the existing property as leverage to acquire the new property you want to purchase. With cross-collateralization, the lender places a lien on both the new property and your existing property. In this way, the lender receives adequate security should you default on the loan. Basically, cross-collateralization allows you to sidestep the normal down payment requirement and/or having to take out a brand new (bank) loan.

G. Retirement accounts: Use your self-directed IRA, Roth IRA, 401-K, corporate plans as investment capital, where it is legal, prudent and appropriate to do so. Utilizing a self-directed retirement plan can empower a REIer by boosting their retirement savings, one deal at a time. Since we are talking about your retirement money, an extra degree of caution is called for. You need to possess excellent due diligence and underwriting skills in order to properly assess the potential risks involved.

H. Cash-Out Refinance. If your personal residence has a good amount of equity in it, you can unlock that equity via a cash-out refinance by tapping some of that equity. Make sure you fully understand the implications of such a loan should things not go well with your anticipated new investment. A cash-out refi may feature (more) favorable interest rates compared to a hard money loan. Also, the interest you pay is tax deductible. You need to do a risk/benefit analysis before going down this road. Regardless, if a REI deal looks very promising, and you require fast capital to make it happen, a cash-out finance can be a good way to go.

I. 203-K Loan: This unique FHA mortgage enables you to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.

1. Pros:

a. Lower credit score allowed
b. Smaller down payment requirements (as low as 3.5%)
c. Can provide temporary housing while a home is being repaired
d. Lower potential interest rates, compared to similar loan types
e. Ability to combine home purchase and renovations into a single loan

f. Low down payment and credit score requirements

2. Cons:

a. FHA mortgage insurance required
b. FHA loan rates may be higher compared to conventional loans
c. Process may require meeting with a 203(k) repair consultant
d. More extensive repairs require more paperwork
e. Potential for the additional cost of architectural assessments
f. Property must be your primary residence
g. You must live in the home for 12 months before selling or renting it out

J. More creative financing methods to consider include:

1. Approach friends, relatives, etc. Options can include debt or equity.

2. Equity investors. The advantage here is that you do not have to make monthly payments because there is no loan. When the deal is done, some sort of profit split is made to compensate the investor(s).

3. Credit card advances. This can be an expensive gambit. It is only to be undertaken when you are very sure of positive, short-term outcomes. The bank may charge several points and up to 29% interest rates, so be very careful with this one.

4. Joint venture: you bring the deal, they bring the money, split the profits at the end. This is a variation on an equity-type investment.

5. Hypothecate (borrow against) a mortgage note you own. Basically, you take out a loan by pledging the note, thereby using it as collateral to secure the loan.

6. Personal asset loans: pawn some jewelry; get a car title loan, etc.

Down Payment Assistance Funding Program

Are you a Real Estate Investor Pro (REI Pro) who has a property you want to buy, with a 70% LTV or better, but you lack some of the Down Payment (DP) money needed to close the deal? You need say, 25% DP, but can only come up with 10% and need 15% more (DP money.

The good news is if your deal meets our standard criteria (70% LTV or better = 30% or more equity in the deal, etc.), CTF can provide the missing 15% in DP funding. By not having to put out all your own capital into DPs–especially if you are low on cash–you’ll be able to do more deals. With your DP source already in place, it will shorten your time for getting positive confirmation from your primary lender, and for getting more deals successfully closed.

For more information about Tod Snodgrass, please visit: https://creativetransactionfunding.com.

Thank you.

Tod Snodgrass, President
Creative Transaction Funding LLC
8322 El Paseo Grande
La Jolla, CA 92037
310 408-7015
https://creativetransactionfunding.com

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Unlocking the 12 Secrets of Estate Planning: Building a Legacy of Financial Freedom and Protection

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By Kris Miller

Life, with all its twists and turns, grants us moments of joy and success, yet it also challenges us with uncertainties. As we journey through the tapestry of time, it’s vital to be equipped with the tools that safeguard our hard-earned assets and ensure our wishes are honored. Welcome to the realm of estate planning – a treasure trove of wisdom that empowers you to craft a secure future for yourself and your loved ones.

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1. The Best Estate Planning Tip: Seize the Present Moment

In the symphony of life, procrastination is your foe. The greatest estate planning advice is to initiate the process now, while clarity and competence are your companions. Forge your plan for asset management and care in the face of adversity. Be the architect of your destiny, steering clear of court interference.

2. Beyond the Will: Embrace the Living Trust

A will, though essential, can lead to probate – a journey through courts that consumes time and money. Step into the embrace of a Living Trust, a sanctuary that shields your estate from probate’s grasp. For those with real estate and substantial assets, this is your golden ticket.

3. Fund Your Trust: Empower Your Legacy

Empower your Living Trust by aligning all your assets with its name. A simple signature card at the bank, overseen by your Powers of Attorney, is your key to unifying your financial fortress.

4. Safeguarding the Wisdom: Storing Important Papers

Preserve your precious documents within the embrace of fireproof protection. Ensure your Powers of Attorney hold a key to your safe box, ensuring that your plans remain secure.

5. A Guardian of Your Health: Health Care Proxy

Life’s journey can present incapacitation. Who will speak for you then? A health care proxy designates a trusted representative to make critical medical decisions on your behalf. Protect your healthcare wishes and share them with your physician through a healthcare Power of Attorney.

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6. Alternates for Assurance: Naming Agents Wisely

Fortify your estate plan by naming alternate agents to represent your interests. Be the architect of your fate, ensuring your choices are honored even if your first option is unavailable.

7. An Evolving Masterpiece: Update Your Estate Plan

As seasons change, so does life. Keep your plan aligned with your reality, adapting to personal shifts, economic tides, and tax laws. Stay current and let your legacy shine.

8. Armor Against Creditors: Trusts for Protection

Shield your assets from the clutches of creditors. Trusts, designed with protective provisions, offer an impenetrable sanctuary for your wealth, safeguarding your legacy for generations to come.

9. Homestead Haven: Protecting Your Home

The fortress of your home can be fortified further. Secure your residence with the powerful shield of the homestead, offering protection against creditors up to a significant amount.

10. Gifts of Abundance: Reducing Taxes

Bestow gifts to your loved ones with a generous heart, for gifts between spouses are a tax-free expression of love. Harness the art of gifting to reduce the size of your estate, potentially easing the burden of estate taxes.

11. Mastering Estate Tax Strategy: Navigating Estate Taxes

Dodge probate, but remember, it’s not the same as evading estate taxes. Consult an estate planning expert to unravel the intricate web of taxation, ensuring your legacy remains untarnished.

12. Destiny in Designation: Beneficiary Forms Matter

Wills and Trusts are the symphonies, but beneficiary designation forms are the conductors. Ensure your orchestra performs harmoniously by keeping these forms accurate and up-to-date, guiding your assets to their rightful heirs.

Embrace the secrets of estate planning, unlocking the doors to financial security and serenity. Paint your legacy with colors of abundance, knowing that your journey through life will be woven into an enduring masterpiece. Let your story inspire others to sculpt their futures, fortified by the wisdom of estate planning.

Schedule a Free Financial Fitness Strategy Session with Kris Miller, LDA

Legacy Wealth Strategist #1 Bestselling Author, Speaker & Educator

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30+ years of experience assisting others in growing & protecting their wealth. Helped more than 6,000 families avoid financial disaster by strategically planning for their futures. Not one person has lost a single dime on her watch. Her clients learn how to change their families’ financial realities and create incomes they will never outlive

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CA Insurance License OC25427 I am not an attorney. I can only provide self-help services at your specific direction. Should you need legal advice, you will need to consult an attorney. We do Estate Planning, Wills, Living Trusts, Power of Attorney, Health Care Directives and Deeds. Legal Document Assistant in Riverside County, California LDA #000041 Riverside County, expiring 10/15/2021

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Raise Billions In Private Capital Just Like Brad Blazar Has Done

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Dear Realty411 Investor; We hope you are enjoying your journey in real estate. While Realty411 is well-known for helping new real estate investors begin their portfolios, our next New Webinar is designed for those ready to catapult to the next level. Our new PRIVATE CAPITAL Webinar and Bonus Book Special are designed to help sophisticated investors scale their real estate business to a whole new level. It’s time to finally overcome the BIGGEST challenge most real estate entrepreneurs have, which is attracting money to your deals. Join us next Thursday, September 2nd at 12 pm PST (2 pm CST) as we host real estate entrepreneur and capital expert Brad Blazar. Why should yo attend? Well, Mr. Brad Blazar is someone who has personally raised $2 Billion Dollars through his efforts and the efforts of teams he’s led. As a real estate investor, Brad will discuss how to attract, raise and close HNW investors in addition to providing tips on how to build trust which is so important in the process. Register today and receive a digital copy of Brad’s third and newest book – Winning at the Capital Game in addition to his pdf guide Securing an Investment. This is special session you won’t want to miss!
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Don’t miss this important webinar, which will take you to the next level of success. Guests will also receive a free download. Register now and learn how to raise billions in private capital. Virtual seating is limited, thank you.

GET TO KNOW BRAD BLAZAR

Formerly the CEO of a small oil company, Brad Blazar is a highly sought after speaker on the subject of raising capital. Having raised in excess of $2 Billion Dollars. Today, he mentors others around the world as part of a global coaching business on how to raise funds from high net worth investors to build, buy, and scale a business – or fund a special project like real estate. Brad has worked alongside many large real estate syndicators, he is viewed as an industry expert and has provided testimony in multiple arbitrations. Additionally, he has closed the largest mega-million dollar transactions for multiple leading real-estate companies – $9M, $7.5M, $5M for SmartStop Self Storage and national operator of self storage assets in addition to $11M for USAllianz. As a real estate investor himself, he has purchased, rehabbed and renovated over a dozen single family properties (SFR) properties with a portfolio value of $3.5M. Today, he owns interests in multifamily, self storage and land (conservation easements) in addition to owning 5 Star Capital, which is a real estate investment firm. As the author of three books, his first book On The Wings of Eagles – Learn to Soar in Life quickly became a top rated #1 read for entrepreneurs on a large literary blog based in the UK. Additionally, Brad hosts a podcast called Beast Nation which was ranked recently as the 2nd highest ranked show to assist people in coping with COVID-19.
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Kathy Kennebrook Discusses Owner Financing and Work For Equity To Get Your Homes Sold Quickly-Part 2

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Image by Gino Crescoli from Pixabay

By Kathy Kennebrook

The other way Kathy Kennebrook offers owner financing to a buyer is by holding a small second mortgage for them for part of her profit on the deal. This is personally one of her favorite ways to sell properties. Often having this opportunity available makes it easier for your buyer to obtain their first mortgage and gives you monthly cash flow for part of your profit. You actually end up making more on the deal this way since most of the buyer’s monthly payment to you on the second mortgage is interest.

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Image by Clker-Free-Vector-Images from Pixabay

Kathy Kennebrook will typically hold a second mortgage for her buyer’s with a three year balloon. At the end of the three year period, they still end up owing her most of the principle of the original loan. This can become a nice stream of income for you both on a monthly basis and long-term. You end up getting a big check when your property is sold, then smaller monthly payments for a period of time, then another big paycheck at the end of the buyer’s balloon.
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Image by OpenClipart-Vectors from Pixabay

The other method Kathy Kennebrook suggests using to sell properties is to owner finance the sale of your property for your buyer, and then sell the note to someone else at the closing table. If you structure your deal correctly, you usually end up being paid between 90-93% of the total amount in cash when the closing takes place. In this instance, if Kathy Kennebrook knows she is going to sell the note at the closing and take a lump sum cash payment, she makes sure she has sold the property for its full retail value or a little more. This way Kathy still gets a big paycheck and most of the value of her property’s sale.
These are just a couple of other methods you can use to sell houses that will drive buyers to you even in a sluggish market because you are offering your buyers assistance that most other sellers are not.
For more information on selling homes on a Work For Equity Plan, check out part three of this article. In the meantime, visit Kathy Kennebrook’s website at Marketingmagiclady.com for even more information on buying and selling homes quickly in any market.

Kathy Kennebrook Discusses Using Owner Financing To Sell Properties Quickly

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Image by Jens Neumann from Pixabay

By Kathy Kennebrook

Using a work for equity plan to sell houses or owner financing to sell properties is a good plan for getting homes sold quickly in any market especially if they need rehab. So let’s first talk about owner financing properties.

I believe that owner financing is another good way for you to sell your properties quickly and for long term profits. Many sellers do not offer owner financing so this is another good way for you to drive potential buyers to your properties even in a down market. I suggest simply advertising that you are offering financing assistance for your buyer. Many times you will have a buyer who has a significant down payment; they just can’t qualify for a loan for whatever reason at that moment.
Usually if I owner finance a property, I at least want my buyer to have halfway decent credit or at least workable credit that can be cleaned up over a period of time. I have a wonderful broker in place that helps my buyers clean up their credit issues. You can sell your properties using owner financing one of two ways. If you sell a property that has an underlying mortgage, you could do a wraparound mortgage with your buyer.
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Image by Merio from Pixabay

A wrap around mortgage is simply a mortgage that wraps around the underlying note. I would absolutely suggest using an attorney to put these deals together for you so it is done correctly and in a way that allows you to foreclose out the note if your buyer stops paying.
So how does a wrap around mortgage work? What this means is that your buyer pays you a mortgage payment each month on your property and you pay your underlying mortgage. The difference between these two payments is yours to keep as monthly cash flow as long as taxes and insurance are handled.
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Image by jessica45 from Pixabay

If you have used an attorney to do the wrap around mortgage for you, your buyer is going to be responsible for the taxes and insurance on the property and will provide you with proof that these have been paid.
For more information on owner financing properties and wrap around mortgages, visit Kathy Kennebrook’s website at Marketingmagiclady.com for even more information on buying and selling properties quickly in any market.

The Federal Reserve Rolled into the US Treasury and Economic Forecast

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By David Mashian

In March of 2020, the single biggest news event of the decade hardly got any news coverage, and that is the Federal Reserve just got rolled into the US Treasury Department. This happened in the midst of the COVID-19 pandemic, so such massive news got drowned out by Corona Virus news and concerns. Most people don’t know what the Federal Reserve is or was. To put it simply, The Fed was a privately-owned banking cartel owned by foreign and domestic wealthy banking families who controlled the economic system of the United States by controlling its money supply. With this single act, the US government now owns “The Fed” and has the ability to govern its own financial destiny without acquiescing to a third-party entity whose interests are not aligned with WE THE PEOPLE. We, through our elected officials, now control our own money supply. THAT IS HUGE!

usa-1026228_1280This bodes well for our economic recovery as a result of the COVID-19 pandemic that paralyzed the US. President Trump, through the US Treasury, now has full control over spending money to stimulate economy. As a result, it looks that the US is at the start of a golden age.

With this new power, President Trump can stimulate the economy in the following ways:

  • Historically Low Interest Rates – Interest rates will be maintained at zero until 2022 to be able to stimulate the economy through liquidity and cheap money. We will see continued purchases of homes and a boom in the refinancing of single-family residences – keeping more money in people’s pockets instead of interest payments.
  • Easy Lending Standards and Lots of Stimulus Money – The Federal Government has already provided PPP loans, SBA COVID-19 Disaster Loan Assistance, unemployment benefits, and much more to keep people afloat while we work through the aftermath of this pandemic. There will be more to come, and since President Trump controls the Federal Reserve by way of the US Treasury, there are no obstacles.

Economic Forecast: We Had a Pause – Not a Crash

keyboard-393838_1280I believe we will bounce back soon, be it V-shaped or U-shaped recovery. We have a pro-business President who understands that small businesses are the backbone of the country. There will be lots of investment money available to businesses going forward. In fact, the new version of the Federal Reserve is establishing the Main Street Lending Program to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic.

There are many factors that still hold true despite the Corona Virus lock down, including a strong jobs market and strong stock market.

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  • Strong Jobs Market – People (employers and employees) are eager to start work after being cooped up self-isolating for so long. Similarly, the employers looking to fill positions before the lock down are still looking to fill positions. Also, many of the people who could not work during the pandemic are basically on hold, and will be back at their jobs once the COVID-19 situation clears up. We saw a pretty fast bounce back with the first reopening, and it will things will bounce back again once the coast is clear of COVID-19 in this second wave.
  • Stock Market Strong – The stock market is still strong, and did not suffer a meltdown as a result of the pandemic. Most importantly, people’s retirement funds are secure and confidence in the economy to go back to work is stable. This may largely be a product of unprecedented government and central-bank support, and a lack of compelling alternatives to equities.

Going Forward

MORE JOBS AND ECONOMIC STIMULUS COMING!

  • setting-2473875_1280USMCA Trade Deals Just Took Effect July 1 – The new United States-Mexico-Canada Agreement (USMCA) is a mutually beneficial win for North American workers, farmers, ranchers, and businesses. This will create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the North American economy.
  • Huge Infrastructure Investments – The Trump administration is preparing an up to $1 trillion infrastructure package focused on transportation projects such as roads and bridges and 5G wireless infrastructure and rural broadband. All infrastructure improvements have the added benefit of creating secondary and tertiary jobs that support the initial infrastructure jobs.
  • Elimination of Payroll Taxes Likely – President Trump is pushing to eliminate payroll taxes. This should boost the economy by putting more money into the pockets of Americans resulting in higher spending for goods and services, speedier repayment of debts, and a faster return to normalcy. This amounts to slightly higher real wages for workers at no higher cost to the employer.

We are in the midst of a recovery, and in the worst-case scenario if we don’t see a recovery, the Federal Reserve can still lower interest rates to negative. Yes, that’s right, negative interest rates. This sounds odd, but many countries around the world, such as Japan, Denmark and Switzerland, currently have negative interest rates. Similarly, right now, the Eurozone, Norway, Sweden, and Bulgaria are at 0% interest rate, with Israel, the United Kingdom, Canada and Australia being near 0%. It is a real possibility.

One thing is clear, we are in the midst of a paradigm shift, with a change of perception of money and how money is used and transferred. The power structures that controlled the economic and political systems have changed and more is to come. The once unimaginable is becoming real, and I see great progress for humanity and the planet as a result.

I hope you have found this newsletter helpful. Please feel free to contact me anytime.

Nationwide Real Estate Lending
Contact me now for more information:
David Mashian
310.903.6907
[email protected]
Visit us at: https://moneymacloans.com/

TOP 5 АLTЕRNАTІVЕ FІNАNСІNG AVAILABLE TO ЕNTRЕРRЕNЕURЅ

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Dr. Teresa R. Martin, Esq.

Indeed, financing is a сruсіаl piece оf thе puzzle fоr almost еvеrу buѕіnеѕѕ. Unless you hаvе ассеѕѕ tо enough саріtаl tо bооtѕtrар your buѕіnеѕѕ оr raise it frоm family and friends, chances are you’ll need a loan оr investments.

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Whеn a conventional bank lоаn іѕn’t rіght for уоu, оr іf уоu’rе lооkіng fоr аn аddіtіоnаl іnjесtіоn of саріtаl tо grоw уоur соmраnу, thеrе аrе рlеntу of оthеr орtіоnѕ. Hеrе аrе five аltеrnаtіvе wауѕ tо fіnаnсе уоur startup оr grоw уоur ѕmаll business.

1. Love Money

Thіѕ is mоnеу lоаnеd bу a ѕроuѕе, раrеntѕ, family or frіеndѕ. A bаnkеr соnѕіdеrѕ this as “раtіеnt саріtаl”, whісh іѕ money thаt wіll bе rераіd lаtеr as уоur buѕіnеѕѕ profits іnсrеаѕе.

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When borrowing lоvе mоnеу, уоu ѕhоuld bе aware thаt:

  • Family and frіеndѕ rаrеlу hаvе muсh саріtаl.
  • They mау want to hаvе equity in your business; bе sure уоu don’t gіvе thіѕ аwау.
  • A buѕіnеѕѕ relationship with fаmіlу оr frіеndѕ should never bе taken lіghtly.

2. Rеtіrеmеnt Funds

Aѕ wіth bоrrоwіng money frоm friends оr fаmіlу to buy a buѕіnеѕѕ, some mіght соnѕіdеr uѕіng mоnеу frоm a rеtіrеmеnt nest-egg rіѕkу. That ѕаіd, іt саn оftеn be аn effective wау tо invest in your еntrерrеnеurіаl endeavors аnd hаѕ hаd ѕuссеѕѕful оutсоmеѕ fоr mоrе аnd more of today’s buѕіnеѕѕ buуеrѕ. As lаіd out bу the government’s ERISA law , уоu саn іnvеѕt уоur existing IRA оr 401(k) funds tо the рurсhаѕе of a buѕіnеѕѕ wіthоut tаkіng аn еаrlу dіѕtrіbutіоn and іnсurrіng реnаltіеѕ.

It’ѕ even роѕѕіblе tо соmbіnе mоnеу frоm your rеtіrеmеnt fund with loans аnd other fundіng mеthоdѕ fоr grеаtеr flеxіbіlіtу. Mаnу еntrерrеnеurѕ choose tо іnvеѕt in a buѕіnеѕѕ thеу control because thеу believe thе grоwth opportunity іѕ greater and wаnt tо dіvеrѕіfу a роrtіоn оf their rеtіrеmеnt holdings оutѕіdе оf thе ѕtосk market.

3. Angel Іnvеѕtоrѕ

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Angel іnvеѕtоrѕ іnvеѕt in еаrlу-ѕtаgе оr ѕtаrtuр соmраnіеѕ іn еxсhаngе fоr a 20 tо 25 percent return оn thеіr іnvеѕtmеnt. Thеу hаvе helped to ѕtаrt uр many рrоmіnеnt companies, including Gооglе аnd Cоѕtсо.

Angеlѕ are generally wealthy іndіvіduаlѕ or retired соmраnу еxесutіvеѕ whо invest directly in ѕmаll firms оwnеd bу оthеrѕ. Thеу аrе often lеаdеrѕ іn their оwn field who not оnlу contribute thеіr еxреrіеnсе аnd nеtwоrk of соntасtѕ but аlѕо thеіr tесhnісаl аnd/оr mаnаgеmеnt knоwlеdgе. Angеlѕ tend to fіnаnсе thе еаrlу ѕtаgеѕ оf thе business with іnvеѕtmеntѕ іn thе order оf $25,000 tо $100,000. Institutional venture саріtаlіѕtѕ рrеfеr lаrgеr іnvеѕtmеntѕ, in thе order оf $1,000,000.

In turn for risking thеіr mоnеу, thеу reserve thе rіght tо ѕuреrvіѕе thе company’s mаnаgеmеnt practices. In concrete tеrmѕ, thіѕ оftеn іnvоlvеѕ a ѕеаt on the bоаrd оf dіrесtоrѕ аnd an assurance оf trаnѕраrеnсу.

Angеlѕ tеnd to keep a lоw profile. Tо mееt thеm, уоu hаvе tо соntасt ѕресіаlіzеd аѕѕосіаtіоnѕ or ѕеаrсh websites оn аngеlѕ.

4. Sеllеr Financing

Inсrеаѕіnglу tоdау mоrе buѕіnеѕѕ-fоr-ѕаlе trаnѕасtіоnѕ are resting оn a ѕеllеr’ѕ wіllіngnеѕѕ tо finance аt least раrt оf a sale. In a dеаl that includes ѕеllеr fіnаnсіng, the seller takes раrt оf thе purchase рrісе іn саѕh аnd the rеmаіndеr in thе fоrm оf a рrоmіѕѕоrу nоtе that the buуеr wіll рау bасk with іntеrеѕt оvеr a period of three-to-five years. Thіѕ hаѕ bесоmе еѕѕеntіаl; buуеrѕ аrе having dіffісultу ассеѕѕіng funds through trаdіtіоnаl mеthоdѕ, thеrеfоrе there’s a natural grаvіtаtіоn tоwаrd ѕеllеr-fіnаnсеd buѕіnеѕѕеѕ tо hеlр offset ѕоmе оf the cost uр frоnt.

Conversely, ѕеllеrѕ whо соntіnuе tо ѕау nо tо seller financing are fіndіng it difficult tо сlоѕе a deal, аnd as more оf thеm have rеаlіzеd thіѕ, there has bееn an іnсrеаѕе in seller-financed buѕіnеѕѕеѕ on thе mаrkеt. If you’re іn thе mаrkеt fоr a small buѕіnеѕѕ іt’ѕ іmроrtаnt to bе aware of alternate fundіng орtіоnѕ, but know thаt in some саѕеѕ it’s still possible tо bоrrоw frоm a bаnk. Government ѕtіmuluѕ аnd bаnk роlісу have bееn trуіng tо рrоmоtе ongoing ѕmаll buѕіnеѕѕ lending, аlthоugh mаnу bаnkѕ аrе still mоrе соnѕеrvаtіvе thаn thеу uѕеd tо bе аbоut when аnd to whоm thеу’ll lоаn mоnеу.

5. Crоwdfundіng

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Crоwdfundіng оn ѕіtеѕ such аѕ Kісkѕtаrtеr and Indіеgоgо саn gіvе a boost tо fіnаnсіng a ѕmаll buѕіnеѕѕ. Thеѕе ѕіtеѕ allow buѕіnеѕѕеѕ to рооl ѕmаll іnvеѕtmеntѕ frоm a numbеr оf іnvеѕtоrѕ іnѕtеаd оf hаvіng to lооk fоr a single investment.

Mаkе ѕurе to rеаd thе fіnе рrіnt оf different crowdfunding sites bеfоrе mаkіng уоur choice, аѕ ѕоmе ѕіtеѕ hаvе рауmеnt-рrосеѕѕіng fееѕ, оr rеԛuіrе buѕіnеѕѕеѕ to raise their full stated goal іn оrdеr tо keep аnу оf thе mоnеу rаіѕеd.

Tоdау’ѕ business-for-sale marketplace is full оf еxсіtіng орроrtunіtіеѕ that wіll аllоw уоu to take your dеѕtіnу іntо уоur оwn hands, аnd wіth vаrіоuѕ options аvаіlаblе thеrе’ѕ no rеаѕоn to lеt a ѕhоrtаgе of traditional capital ѕоurсеѕ gеt in the wау of уоur dreams.

 

Dr. Teresa R Martin

Dr. Teresa R Martin, Esq. is a Motivational Speaker, Author, Million Dollar Real Estate Wealth Coach, Business Strategist, and Legal Counsel. She is living the life she loves and can teach you how to do the same!

As Founder of the Generational Wealth Zone Group, Teresa Martin formed the original vision for a group of companies that would help clients create, manage, protect and grow their wealth. She is dedicated to showing individuals and entrepreneurs how to become financially empowered by turning the work they love into a profitable and sustainable business.

Is Credit Card Stacking Really Going to Help You Fund Your Real Estate Deals?

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By Jessica Guisinger and Merrill Chandler

If you are a new or seasoned real estate investor and you have been looking for capital to fund your real estate deals, there is a good chance you have heard of credit card stacking.

Credit card stacking is the practice that credit brokers use to help individuals acquire credit by applying for multiple personal credit cards at the same time. The idea is that once you are approved for multiple credit cards, you can use the newly extended credit to fund your real estate deals. While getting multiple credit cards at the same time may initially sound like a great idea, doing so can create serious problems—especially if you attempt this strategy without fully understanding the consequences.

“I think just about the worst mistake I’ve ever seen an investor make is funding a deal by employing a credit card stacking strategy,” said Jessica Guisinger, the referral partner liaison with CreditSense, a firm that specializes in improving both personal and business fundability for real estate investors and small businesses. A cursory review of their website reveals they are nothing like a credit repair agency, but rather a Fundability Optimization firm, that gives its real estate investor students and clients a great deal of specialized insight into the inner workings of credit underwriting in general, and credit approvals in particular.

“We see a lot of offer there that offer investors “funding” to do deals, but in reality they are just managing credit card stacking [for the investor],” Jessica explained. “These companies do not disclose—and investors rarely know until it’s too late— that getting the funding they need by maxing out these new credit cards will absolutely ruin the investor’s chance of obtaining future funding, and it inevitably tanks that person’s personal credit profile and score as well. And to add insult to injury, the 0% offer that was so attractive almost always disappears when they try to liquidate their credit card limit for cash.”

What credit card stacking participants don’t know is that even if they pay on-time for the next 24 months, they will be flagged as high risk borrowers because lenders view this practice as an extremely high risk behavior. The investor will also be flagged as high risk because of the sudden spike in utilization (balance to limit ratio), and a demonstration of poor credit management.

“A far better solution is to use true business lines of credit as your funding source. When you have the right credit profile these lines of credit offer the lowest rates available and you can get these business lines of credit with full check-writing capability at 3% to 6% to fund your deals,” recommended Jessica. “This type of funding is not only check-accessible, but it is unsecured as well. This feature offers a huge advantage for real estate investors because it helps make them MORE fundable while improving their personal credit rather than destroying it.”

Many real estate investors assume they cannot qualify for unsecured business lines of credit, or that they will need to pay high interest rates in order to obtain them without ever discovering the truth. Jessica noted that with the right borrowing strategies, this is patently untrue. “A lot of real estate investors need help becoming fundable because they have been playing the funding game without knowing the rules. And, not knowing the rules is made even worse because real estate investing is considered a high risk business by lenders—they don’t want to even talk to you much less give you money,” she said.

Jessica continued, “Thankfully there is hope. There’s a way for real estate investors to get inexpensive money from top tier lenders. They simply need to learn the rules of the funding game and then play that game at a professional level. In fact, if you know what you are doing, you can obtain these unsecured business lines of credit and then strategically grow them to $1 million or more in real estate funding,” she said.

“Experts who help others acquire this type of funding do not just jump in without exploring the current fundability of an interested investor,” Jessica concluded. “If someone does not do a little bit of fact-finding and a comprehensive fundability analysis before they lay out a plan for you, be on alert,” she said.

 

7 Personal Finance Questions to Ask Yourself Before Getting a Mortgage

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By Dr. Teresa R. Martin, Esq.

Are you ready for a mortgage? It’s a big step that requires careful planning. A mortgage will affect your financial future for years to come.

Before you sign that mortgage, consider these finance questions:

  1. What is your credit score? Credit scores affect mortgage rates.
  • Before buying a house, check your credit score. Should you raise your score to get a better interest rate? In general, high scores with no late payments during the last three years are enough to get good rates.
  1. Are you capable of handling maintenance costs? It’s important to consider the cost of maintenance before buying a house.
  • The mortgage is only one part of the total cost of owning a house. Maintenance is another important piece. Will you be able to pay for a new roof or air conditioning system when the current ones wear out?
  • Does your monthly budget include enough savings for maintenance?
  • It’s also important to consider DIY projects and hiring others to complete tasks. House maintenance can involve expensive and ongoing projects. Are you ready to pay for these costs?
  1. How secure is your job? Before signing a loan, evaluate your job security. Will the work last? How will you handle changes?

  • Evaluating your job future is part of planning for a home purchase.
  • Consider emergency funds and savings in your plan. If your job situation changes, will you be able to continue making monthly mortgage payments?
  1. Do you have the necessary financial paperwork? Mortgage applications require a great amount of paperwork. Lenders can ask for old tax statements, check stubs, savings account statements, and other information.
  • If you have a high credit score, you may get a no documentation loan.
  • It’s rare to get a no documentation loan, so it’s better to be prepared by checking your files and collecting the financial papers you may need.
  1. Did you calculate the hidden expenses of owning a home? Home ownership comes with multiple expenses that go beyond appraisal fees, property taxes, mortgage closing costs, and insurance.

  • One of the hidden expenses of moving to a home is more bills. If you’re used to renting, then home ownership can change your monthly bills by adding new ones. You’ll add trash collection, water, recycling and sewage in most locations to the expense list.
  • Home insurance is higher than renter’s insurance. In addition, older homes cost more.
  • Homeowners’ association fees are becoming more common in neighborhoods. You may be aware of condominium association fees, but are you ready to pay homeowners’ fees?
  1. Do you have an emergency fund? Emergencies can vary from broken dryers to flooded patios, so you need to be ready for anything. Is your emergency fund big enough to handle common, unplanned expenses?
  • Emergency funds are a better option than credit cards or loans. Putting enough money aside can help you avoid new debt.

  1. Are you applying for other credit? Mortgage lenders can see applications for other types of loans on your credit report.
  • Applying for other types of credit while trying to get a mortgage can hurt your loan. Mortgage companies view these applications as risks, so it’s better to wait before trying to get another credit card.
  • Applications for new credit lower your credit score and affect interest rates.

A mortgage is a responsibility that affects multiple areas of your financial life. Before you buy a house, consider how your current financial situation will be affected and plan for emergencies.

Dr. Teresa R. Martin, Esq.

Dr. Teresa R. Martin, Esq. is the founder of Real Estate Investors Association of NYC (REIA NYC). REIA NYC (www.reianyc.org) is a premier real estate investment association serving the New York City marketplace. Its primary focus and mission is “helping our members build, preserve, and harvest multi-generational wealth” in the areas of real estate investments, business ownership and personal development.