What Makes a Good Real Estate Note?

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Image from Pixabay

By W. J. Mencarow

The value of a note ultimately depends upon the economic conditions that support the value of the property.

An owner-occupied single family house in a good neighborhood located in an area with a long-term stable economy is the best collateral possible. It is further enhanced by a payor who has an excellent credit record and unblemished payment history.

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Less desirable collateral, in descending order: owner-occupied (owner lives in 1 unit) duplexes/triplexes; non-owner-occupied single family houses; non-owner-occupied duplexes/triplexes; other non-owner-occupied multi-family units; improved land; commercial (non-industrial) properties; resort properties; subdivided but unimproved lots; raw land (some buyers would use a slightly different hierarchy).

Due to the current regulatory environment in the U.S., industrial properties, gasoline stations, even properties with underground oil tanks have many hidden liabilities. Notes secured by such properties should be avoided. Cooperatives, time-shares, mobile homes and personal property are not real estate and by themselves are not adequate security for notes.

The higher the investment-to-value ratio, the riskier the note (ITV = amount paid for the note + senior lien balance/market value of property).

Image from Pexels

If there is little or no appreciation in the property, the loan-to-value ratio is a barometer of the likelihood of default. Notes on property purchased for $1,000 down or less often default. The higher the downpayment, the better.

An amortized note is more valuable than one with a balloon, since the payor may not be able to make the balloon payment.

The single most powerful financial aspect determining the value of a note is the amount of the monthly payment. For example, all else equal, a 10 year note with a large monthly payment and no balloon is worth more than a 10 year note with a smaller monthly payment and a balloon.

A note in the first lien position is more valuable than one in the second lien position. Third lien or lower notes are worth very little.

A second lien note with a huge balance first lien should be avoided. In case of foreclosure, the owner of the second lien would have to make the payments on the first.

A seasoned note (one with a payment history of several years or more) is better than a green note (little or no payment history).

Image from Pexels

The payor’s credit history is important to help determine the character of the payor and likelihood of default, but it is not infallible. Everyone, even those with the best credit, can lose their incomes, have medical emergencies or suffer other unforeseen catastrophies. The best use of a credit report is to identify a potential bankruptcy candidate.

Again: The value of a note ultimately depends upon the economic conditions that support the value of the property.

Copyright 2022, The Paper Source, Inc. and W. J. Mencarow.
W. J. Mencarow is president of The Paper Source, Inc.

New Online Investor Summit, May 21st, 2022

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You’re Invited to Our Virtual Event, Learn More.

Attention savvy real estate investors, it’s time for another informative Realty411 Virtual Investor Summit. This spectacular online event will unite both new and accredited investors as well as top-notch educators for a wonderful weekend of learning, motivation, and networking.

Be sure to register now for our NEW VIRTUAL Investor Summit on MAY 21st, 2022 – 9 AM to 4 PM PT.

Guests will learn from top experts ready to share important knowledge, strategies, and insight. This event is Live and Interactive. Sorry, no video replays will be made available later as we want to keep this unique experience exclusive and exciting.

Joining us for this special Virtual Summit will be experts from around the nation, and Canada, ready to share their secrets on in-demand topics, including:

  • identifying and buying in solid rental markets
  • diving into multifamily units and growing a portfolio
  • scaling a real estate investment business
  • brokers: become a Top Producer in your city
  • commercial syndication strategies and advice
  • how to raise private capital for all your deals
  • rehab techniques and secrets from professionals
  • private lending education and implementation
  • plus, how to transition into a new real estate market
  • AND SO MUCH MORE!

Relax and Recharge in Your Mental Hobby Shop

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Image from Pixabay

By Dan Harkey

Most people have a place they go to or an activity they engage in that helps them move into peacefulness, serenity, and resolve. They can spend time happily away from exterior societal pressures. I refer to that state of being as their Mental Hobby Shop, which will help them to exclude all the extraneous life pressures and extraneous violations of their sovereignty. Each of us needs to define where our mental hobby shop is located and conscientiously try to spend more valuable time there.

Here are a few examples of preferred hobby shops:

Image from Pixabay

  • Garage tinkering: Time spent in the garage with things like bicycles, cars, or motorcycles. There is nothing like washing and waxing a bike to take you into another world. How about repairing something, organizing useless stuff, or inventing something useful?
  • Golf and active sports: Time spent on a golf course, tennis court, or workout facility. How about riding horses or cruising on a street bicycle or mountain bike?
  • Personal activities: Time spent with individual activities such as painting, scrapbooking, reading a good novel or playing a musical instrument.
  • Family: Time spent with family and pets at a picnic or outing where life’s daily pressures are minimal, and enjoyment is paramount.
  • Outdoors: Time spent walking on a trail, park, or beach. Being outdoors has excellent therapeutic value. Getting close to nature is always rewarding. I have enjoyed walking in the rain on the beach with a raincoat.
  • Vacations: Great time to explore, whether at local parks, national parks, or leaving on a jet plane. How about a local harbor getaway or an extended cruise ship vacation?
  • Camping retreats: Time spent camping, with a BBQ, or RV with friends and family.
  • Tranquility: Reading books, listening to tapes or videos that reflect positive thoughts rather than anguish, disgust, or pain. There is no need for intensive inquiry or into searching for meaning. That includes avoiding watching news that portrays our circumstance as an inevitable Armageddon. Just positive thoughts!
  • You are helping others: Volunteering for various activities that help others without expecting a financial return.

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My Mental Hobby Shop consists of the activities.

  1. My garage: Time spent tinkering in my garage, maybe even having a beer, and listening to classic rock or country music.
  2. Out on the road: Time spent with my motorcycles and electric bicycle, washing, waxing, checking the tire pressure, or riding out on the road. Just head out on the highway, looking for adventure. Where have I heard that before? Much like being in the movie, Born to Be Wild, only with much less wild at my age. I may head out for a destination to meet my buddies who belong to the 4-B Club. 4-B stands for bikes, buddies, beer, burgers, and discussing buddy things.
  3. Walking: on the beach, around the harbor, through a delightful park, or around the neighborhood. 3 to 4 miles is my goal. I get sunshine, vitamin d, exercise, a nice breeze, and peace of mind. After a shower, I feel great.

Image from Pexels

Identify where your Mental Hoppy Shop exists and conscientiously spend more time there. Life will be more rewarding where your state of happiness dwells. Happiness creates renewed energy and motivation, stimulates creative thought, and feeds overall physical and emotional health. The key is to detach from work-related issues and societal pressures and stop reading and listening to mainstream news propaganda.

News media outlets spew news full of sensationalism followed by a barrage of advertisements. The news is designed to sell you something and to create strife about how terrible everything is. Of every one-half hour segment that someone watches mainstream news, only about thirteen minutes is considered news, although the content is always filtered through an ideological kaleidoscope. Then ad nauseam advertising segments follow for about seventeen minutes.

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Within mainstream news, the commentators and the guest experts consistently deliver the narrative as subscribed to by the media company. FOX, MSNBC, AND CNN present material from an opposite perspective. Experts will work within an approved framework for acceptance and consensus-building, rather than seeking truth. Experts will act to ensure job security, cultivate kindred relationships, expand their careers, and seek more notoriety.

Little independent critical thinking and unbiased scientific analysis can be found in the mainstream media. Those who want actual and truthful content can find alternative news sites and information sources online.

Yes, turn off the toxic tube and cell phone! Yes, turning off is difficult to do for a few of us who are extroverted, outgoing and task oriented. Those folks tend to be direct, decisive, driven and demanding. But they can also become addicted to staying connected and watching 24/7 biased propaganda news.

This article is intended for educational purposes only and is not a solicitation.

© Dan Harkey. This material’s unauthorized use or duplication without express and written permission from this author or owner is strictly prohibited. The article may be used in marketing efforts, provided that full and clear credit is given to Dan Harkey. The credit displayed when you forward any article must include Dan Harkey, Business & Finance consultant. You are not authorized to modify the articles title or the content.

This article is an overview for a general educational purpose only. The information presented should not be relied upon without the advice of counsel.

Dan Harkey is a contributing author to Weekly Real Estate News and is a Business & Financial Consultant. He can be contacted at 949-533-8315 or [email protected].

Real Estate Money Finding Summit

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Dear Fellow Investor,

I wanted to personally invite you to our next live training event titled “The Real Estate Money-Finding Summit”.

You can RSVP at:
https://bit.ly/RE-Money-Finding-Summit-202

Over 16 of the world’s greatest real estate investors and experts are coming together to share their insider secrets for getting all the loans, lines of credit, government grants/credits, and private money you’ll ever need to fund all your deals.

No serious real estate entrepreneur should miss this…

Hope you can make it!

Bill Guting

Since 2010, REIWealthmag.com has assisted top companies expand their visibility and grow their business, contact us for a complimentary marketing session. Investors, do you have questions about real estate or need capital for your deals? CLICK HERE.

NEW VIRTUAL Investor Summit

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You’re Invited to Our Virtual Event, Learn More.

Attention savvy real estate investors, it’s time for another informative Realty411 Virtual Investor Summit . This online event will unite investors and educators for a wonderful weekend of education, motivation, and networking.

Be sure to register now for our NEW VIRTUAL Investor Summit on APRIL 23RD AND 24TH, 2022 – 9 AM to 2 PM PT.

Guests will learn from top experts ready to share important knowledge, strategies, and insight. This event is Live and Interactive; no replays will be made available.

Joining us for this special Virtual Summit will be experts from around the nation, and Canada, ready to share their secrets on in-demand topics, including:

  • identifying and buying in solid rental markets
  • diving into multifamily units and growing a portfolio
  • scaling a real estate investment business
  • brokers: become a Top Producer in your city
  • commercial syndication strategies and advice
  • how to raise private capital for all your deals
  • rehab techniques and secrets from professionals
  • private lending education and implementation
  • plus, how to transition into a new real estate market
  • AND SO MUCH MORE!

Investors, join us to become a VIP member to gain access to our private mentoring session every month. Our first session will be 90 minutes and will dive deep into the best real-estate strategies for those in the group.

After that, enjoy a 30-minute session monthly to ensure you’re on the right track for real estate success. Along with mentoring, the VIP membership also includes access to Realty411 VIP discounts, plus access to our online VIP network, as well as other perks.

To learn more, CLICK HERE. After registering for either an annual or monthly membership, we will contact you with details about the session.

Realty411’s virtual investor event is sponsored by Blue Ocean Capital.

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Please connect with these top companies for your business needs.

Since 2007, Realty411.com has assisted companies of all sizes expand their visibility and grow their business quickly, contact us for a complimentary marketing session. Investors, do you have questions or need capital for your deals? CLICK HERE.

What are corporate rentals?

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Image from Pixabay

Corporate rentals are rental properties that serve a variety of travelers. These rentals are fully-furnished properties with more amenities than a hotel may offer. Often, the property will have premium upgrades that a basic hotel room cannot provide. Such amenities include:

Image from Pixabay

  • Refrigerators
  • Cooking appliances
  • Fully furnished dishware and cooking supplies
  • High-Speed Internet
  • Television
  • Office space
  • Washer/Dryer
  • Extra linens
  • Gyms or workout areas

The idea is to provide a “Home away from home” feeling. Providing a comfortable space is beneficial to both the traveler and the employer.

Who should rent corporate rentals?

Image from Pixabay

Often corporate rentals are intended for executive travelers or business employees, and the employer will routinely pick up the tab. While an employer may often be the payee, other entities may also foot the bill, including insurance companies, armed services, or event coordinators.

Families seeking housing in place of hotel rooms often choose corporate rentals for their vacation getaways. The cost and the amenities are often a wiser choice than the standard hotel experience.

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Corporate housing is an ideal option for:

  • Healthcare workers, nurses, traveling doctors, etc.
  • Project managers, construction crews, energy personnel
  • Entertainment industry workers, actors, performers, singers, stage workers
  • Military service members, relocating family members
  • Victims of disasters, such as floods, fires, tornadoes, etc.
  • Medical patients in long-term treatment
  • Employee relocation

Image from Pixabay

Costs

Depending on the location, the size of the place, and the length of your stay, typically, you may see higher costs than an unfurnished room, apartment, or home.

Corporate rental companies often offer better rates for lengthier stays. The longer the visit, the better the deal, and monthly rates are a better option than paying daily or weekly. Booking in advance also may give you a break in terms of costs.

Other costs to factor in are any special needs or accommodations you may have during your stay. If you have extra persons, small children, or pets, you may need to pay additional fees.

Where can I find Corporate Housing?

Image from Pixabay

You can find corporate housing in just about every major city in America and abroad, and Airbnb is a popular choice. You may just want to Google search: housing+the corporate town and state you will be traveling. You may find ads in popular real estate magazines, blogs, or popular travel booking sites.

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Holly Lynn is a Short-Term rental expert, an Airbnb Magician, influencer, model, traveler, and business networker.

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.

How to Become a Real Estate Investor

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Image from Pixabay

Special from Stratton Equities

While, technically, anyone can become a real estate investor these days, what does it really take to become a real success and what are the steps to get there?

Image from Pixabay

Before you get started, there are a few things to keep in mind that will help you determine what kind of real estate investment you want to be a part of. The first of which is figuring out what kind of real estate strategy you want to be a part of. The spectrum of which ranges between being an active investor and a passive investor.

An active investor will typically involve themselves in fix and flip strategies, wholesaling properties to investors, finding and managing a rental property themselves, or working as a licenced real estate agent in their area in order to build commissions for other future investments. An active investor is likely working non-stop, on multiple projects at once, and is always in need of funding.

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On the other hand, a passive investor can engage with real estate investing through buying shares of a property portfolio, partnering with other investors, or just generally investing in other real estate investments schemes.

The choice between being an active or passive investor is really up to the individual and how much they want to be part of the day-to-day operations and rewards of a property. Aside from some monetary constraints or a license to become a real estate agent, there are no barriers to entry to become a real estate investor as anyone can participate, they must first figure out what kind of investment strategy they wish to become a part of first.

Image from Pixabay

Once you have committed to and figured out an investment strategy, you can then move on to learning up about the properties itself. This next step will require a lot of research information as your end goal is to become a realistic competitive expert in the real estate market.

Some of the key subjects to know are what kinds of properties are there and which ones to focus on, and what is the property’s situation in terms of structural support, renovation, location, community, real estate laws and taxes.

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It is important to note that many properties are very different from each other. For example, what might the investment differences be between a multi-family rental property in rural New York compared to urban New York? Or how about a single-family property? Or a commercial property? Or the difference between the exact same property in the mountains compared to the beach? The point is you must be able to distinguish between all the different categories of real estate on top of all the different legal, geographical, and cultural factors that may arise in order to become an adequate expert in your field.

To start off, you might want to focus your skills and knowledge on a particular specialized segment of real estate investment to give yourself a potentially unique advantage.

Overall, unlike many other career paths, earning a degree is not required to become a real estate investor; but if you want to become successful at it, you will have to teach yourself and it will take a lot of time and patience.

Image from Pixabay

Once you have mastered the realm of real estate in relation to your investment strategy, you can move on to mastering the market itself. The market is not too difficult to observe itself as it simply is determined by the nature of buying and selling property. However, the difficulty arises in figuring out the right properties and the right prices.

As you probably understand, the market is not perfect. There are some properties that are overvalued and some that are undervalued. Hence the practice of real estate investment. However, understanding the market will require one to observe these properties for what they are actually worth and determine whether the process of fixing-and-flipping, or whatever investment strategy you are using, is actually worth it. And that itself is the challenge as you not only have to take into account the property itself, you also have to account for the market as a whole and where you think it is heading, which may not always be the case.

Image from Pixabay

After you have mastered the real estate market, you can move on to acquire financing, again, depending on your investment strategy of choice. Here is where your research can finally start to gain you ground in implementing your project.

As one begins to enter the industry, it will be more challenging to find other investors or people who will give you loans as you have not built the relationships yet or had the experience to prove your success. But you have done enough research to register a plan to showcase to investors to get them hooked on your idea.

It is important to know that most investment projects require a lot of capital on your end so you will want to get as much cash on hand as possible. That is where other investors and private money lenders can come in as they can give you enough money to fund your project so that you can live out your real estate investment dream.

Just make sure your strategy is sound and well-presented when trying to acquire more funds. Over time, this process will get easier as you have a longer history, reputation, and credibility within the real estate investment world.

Image from Pixabay

Lastly, just before you go out and purchase your first property, you should read up on the local and state laws so that you are prepared for any legal situation that could stand in your way. No matter how experienced one is, there are always going to be challenges you did not foresee, but the better informed and knowledgeable one is about the property, investment strategy, and local customs and legalities, the better your chances are at overcoming the adversities present towards you.

Image from Pixabay

Okay! You should now know all that there is to get started as a real estate investor. That being said, these are summarized guidelines that merely point out the general steps it should take to get started and become a successful investor. There is a lot to learn and a lot to keep in mind when practicing real estate investing. Just know that more likely than not, it is probably not going to go the way you expect. It could be that managing a rental building is much more costly and demanding than you expect. But, don’t fear. The smarter the strategy, the better the plan, and the more aware you are of the real estate market, the better your chances of success are. Good luck!

If you’re looking for financing on your next real estate investment, Stratton Equities is the leader in Nationwide Direct Hard Money and NON-QM Lending in the real estate market. Reach out to a member of our team today by applying now at www.strattonequities.com

South Florida investments soar in popularity in Q3 of 2021

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Image from Pixabay

By Stephanie Mojica

South Florida is rapidly becoming one of the most-desired places in the United States for real estate investors, according to Redfin. In the last quarter of 2021, investors bought nearly $2.2 billion of real estate in Miami alone.

Four of the top 10 cities in the United States for real estate investments are in Florida and three are in the southern part of the country. The complete list, in numerical order, is:

1. Atlanta

2. Charlotte

3. Jacksonville

4. Las Vegas

5. Phoenix

6. Miami

7. Orlando

8. Tampa

9. Nashville

10. Fort Lauderdale

At the national level, about 18% more real estate properties were purchased as investments in 2021 compared to 2020.

Image from Pixabay

One of the advantages of investing in South Florida is “lucrative tax breaks,” Carolina Gerdts, executive vice president at RelatedISG Realty in Florida, said during an interview with Go Banking Rates.

“…cities such as Miami and Fort Lauderdale are being transformed into house-flipping hotspots where everyone is trying to grab their own piece of paradise through the existing inventory,” Gerdts added. “Given the current prices of existing inventory, those who are willing to put in the extra effort to remodel properties are more likely to snag deals and prime locations within South Florida’s hot real estate sphere.”

Image from Pixabay

While the Sun Belt in general has become more popular due to lower prices than the West Coast and Northeast, cities such as Los Angeles, Anaheim, and New York are still popular, according to the report.

While practices such as buying low and selling high at a later date and flipping houses are still popular, some investors are purchasing higher end properties to rent, according to Redfin economist Sheharyar Bokhari. Part of this shift is the lack of new construction in recent years, a lack of low-priced housing in an increasingly competitive market, and rental housing shortages.

Image from Pixabay

Join us in South Florida, and network live and in person. This is our FIRST live event in Florida in two years. Network with amazing local and national leaders. 

Are you ready to Grow Your Real Estate Business, Portfolio and Network? JOIN US >>>> https://www.eventbrite.com/e/230614573397

Short-Term Rentals and DSCR Loans

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Image from Pexels

By Rick Tobin

Over the past several years, most short-term and long-term rental property owners created the bulk of their wealth from the annual equity gains related to buying and holding their properties as values increased anywhere between 10% to 40% per year. In California alone back in 2021, it was reported that the average home statewide increased in value $11,000 per month or $132,000 for the entire year. If so, I doubt that many Airbnb or VRBO hosts collected more than $132,000 in gross or net rent profits.

Image from Pixabay

Did you know that San Diego, California was ranked as the #1 for having the highest gross revenues of any Airbnb region in the world in 2021? Please see the complete Top 10 list of the highest grossing rentals in the world later in this article.

Let’s look next at just some of the short-term rental listing companies which assist vacation rental property owners with the leasing of their properties:

  • Airbnb
  • VRBO (Vacation Rental By Owner)
  • Booking.com
  • TripAdvisor
  • Expedia
  • HomeToGo
  • Tripping
  • Homestay.com
  • Atraveo
  • OneFineStay

The prominent travel booking company named Expedia purchased VRBO back in December 2015. As a result, Expedia continues to be one of the most dominant short-term rental companies in the world.

As per published Airbnb data, here are the Top 10 states for average annual host or property owners earnings for 2021:

  1. Hawaii: $73,247
  2. Tennessee: $67,510
  3. Arizona: $60,448
  4. Colorado: $58,108
  5. California: $54,461
  6. Florida: $53,209
  7. South Carolina: $49,641
  8. Utah: $48,568
  9. Oregon: $42,964
  10. Alabama: $41,937

Image from Pixabay

If a rental property owner confides in you that he or she collected $50,000+ in gross income from Airbnb last year, this number may only represent a small percentage of their overall total revenue collected from both short-term and long-term tenants (30 days+) because they may have multiple income stream options by way of VRBO, Booking.com, or other companies that help supply them with consistent tenants. This is especially true when the property is located in a populous metropolitan region or a prime vacation getaway area like those found in San Diego, Santa Barbara, or Miami.

No Income Verification Loans for Rentals

Most real estate investors usually need third-party mortgage financing to purchase one or more rental properties even if they are very wealthy themselves. Many years ago, it was quite challenging to qualify for a rental property because you were asked to provide two years’ worth of tax returns, a detailed profit-and-loss statement, and the mortgage underwriters would only give you credit for 75% of your gross monthly rents when attempting to qualify or deny your loan request. This 75% number was due to the fact that lenders assumed that you had property management fees, vacancy rates above 0% throughout the year, and operating expenses for repairs.

As a result, that $2,000 gross rent turned into just $1,500 (75%) and many investors were later denied because few lenders wanted to lend on a rental property with negative monthly cash flow if the proposed monthly mortgage payment (principal, interest, property taxes, insurance, and homeowners association fees, if applicable) was $1,501 or higher.

Image from Pexels

Today, many investors are qualifying to purchase short-term and long-term rentals by way of non-QM or DSCR (Debt Service Coverage Ratio) programs which don’t require borrower applicants’ tax returns, W-2s, or other formal income documents to qualify. Now, some lending programs take the closest look at the subject property before determining if the rental property can at least break-even at a 1.0 DSCR number where 100% of the gross monthly rents are at least equal to the proposed mortgage payment. In these underwriting scenarios, 100% of the gross rents are used to qualify instead of just 75% like was more the norm in years past.

For a DSCR loan, it allows borrower applicants to use the market rent (actual or future, in some cases) of the property to qualify rather than the borrower’s business income. This is especially beneficial for self-employed business owners or investors who have a lot of tax write-offs and minimal net income shown on their tax returns.

Some of these DSCR program highlights include:

  • 640+ FICO
  • Up to 80% LTV
  • Available on investment properties only
  • Finance up to 20 properties
  • Loan amounts up to $2M per property

Some of my other lender programs allow negative cash-flow for rental properties up to 70% LTV for cash-out or purchase transactions while not requiring any additional income from the borrower applicant.

Airbnb Statistic

Image from Pexels

Because Airbnb is the biggest name in the short-term rental business sector, let’s review some of these shocking numbers that confirm how successful this investment property model has been for Airbnb corporate and for individual hosts or property owners.

Airbnb History

  • An average of six guests every single second check into an Airbnb listing.
  • Airbnb listings represent 19% of the total demand for lodging in the US.
  • Over 150 million people have booked over one billion nightly stays.
  • The average US Airbnb occupancy rate is 48%.
  • The average stay is 4.3 nights.

2021 Data

  • The global Average Daily Rate (ADR) was $137 per night in 2021 as compared to $110/night in 2020.
  • California properties had a much higher nightly average of $258 per night.
  • In December 2021, there were 12.7 million listings worldwide.
  • There were 2,249,434 listings in the US in 2021.
  • 356.9 million nights were booked on Airbnb in 2021.

Highest Gross Revenues Worldwide for Airbnb Properties

Image from Pixabay

Surprisingly, these populous metropolitan regions such as Los Angeles, San Francisco, New York City, Paris, London, or Hong Kong weren’t ranked #1 for being the most profitable Airbnb region in the world with the highest gross revenues. No, the honor for the most profitable Airbnb region in the world in 2021 was San Diego, California.

In 2020, seven of the Top 10 highest gross revenues for Airbnb properties were all in the US. One region that stands out is Big Bear, California, which is the best-known mountain resort community in Southern California. Listed below are the 2020 gross revenue numbers for the Top 10 regions in the world:

Compounding Wealth With Equity Gains

There are many individual or family investors across the nation who have acquired 5, 10, 15, or 20+ short-term rental properties. The bulk of their family’s net worth doesn’t usually come from the net annual rental income. No, the family’s net worth is compounding each year with double-digit appreciation rates like we’ve all seen for several years now.

To better understand how the acquisition of multiple rental properties is more likely to create the bulk of your net worth, let’s take a look at a fictional California property owner who saw each of his rental homes appreciate $11,000 per month or $132,000 for the entire year in 2021:

Investors can apply any excess net rental income each year to paying off their mortgage faster. With consistent annual rents, a 30-year mortgage or a shorter-term 5-year or 7-year interest-only mortgage with much lower monthly payments than the best 30-year fully amortizing rates can be paid off much faster as more principal is paid off with extra payments.

The sooner that your homes are free and clear, the earlier you can retire and live off of the monthly cash flow while not touching your equity gains. A fairly consistent plan of buying and holding short-term and/or long-term rental properties is a prime example of letting your money work hard for you instead of the other way around.

Rick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at RealLoans.com for more details.

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 Realty411.com or our Eventbrite landing page, CLICK HERE.

A Primer on “Creative Financing”

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Image from Pixabay

By Bruce Kellogg

History

Modern awareness of “Creative Financing” began about 1980 with Robert G. Allen’s famous book, Nothing Down (Fig. 1). For the next five years or so, a flurry of books were published on related subjects (Fig. 2 and 3). I “grew up” in real estate during this period, and accumulated the library shown in Fig. 4 in addition to closing over 600 transactions using these techniques. In the process, I became known as a “leverage mechanic”. Now, I am preparing a comprehensive book titled, Leveraging Real Estate – Your Guide to Creative Financing. This article is a primer on the subject.

Fig.1

What is “Creative Financing”?

The original use of the term “Creative Financing” applied to anything that was not “CTNL”, “cash-to-new-loan”, when purchasing a property. Then it got narrowed down to financing that was “created” as part of the transaction, such as seller financing. Now, it has opened up to mean all techniques that display imagination on the part of the parties. I like this definition best!

Seller Financing

The most common form of “Creative Financing” today is still “Seller Financing”, or “Owner Carryback Financing”. The following Realty411 magazine articles thoroughly present this subject.

REI Wealth Monthly #49 “Seller Carryback Note Terms”

Real Estate Wealth Vol. 1, 2018 “Seller Financing 101”

Realty411 Vol. 6 No. 4  “Seller Finance 101”

Realty411 Vol. 7 No. 2  “Seller Carryback Note Terms”

Best of Realty411  “Seller Finance 101”

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Managing “Creative Financing”

In the process of using “Creative Financing”, problems could arise in two areas, negative cash flow, and balloon payments. These are thoroughly covered as follows:

REI Wealth Monthly #44  “Dealing With Negative Cash Flow”

REI Wealth Monthly #50  “Dealing With Balloon Payments”

Creative Acquiring Properties

There are other applications of “Creative Financing” besides the use of notes. The following series of articles describe 24 ways, many of which are creative.

REI Wealth Monthly, issues 34, 35, and 37.  “24 Ways to Buy”

Additionally, there are creative ways of partnering described in

Realty411 Vol. 9 No. 2  “Partnering For Profits”

Finally, there are the subjects of Options and Lease-Options which are outside the scope of this article. There is plenty on the internet.

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Accessing the Articles

Realty411 does not have magazine back issues nor copies of past articles available. So, to provide readers a meaningful learning experience, readers can order email copies from the author as follows.

“Seller Financing 101” and “Seller Carryback Note Terms” $12.00

“Dealing With Negative Cash Flow” and “Dealing With Balloon Payments” $12.00

“24 Ways to Buy” (3 articles) $12.00

“Partnering for Profits” $8.00

Checks should be mailed to:

Bruce Kellogg

430 N. Second St. #A

San Jose, CA 95112

Additional Resources

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For readers who are interested in learning more about “Creative Financing” techniques, some Resources (books) are included as an attachment. A internet search will be necessary because they will need to be purchased used if they are available. Of course, current books on the subject should be searched, as well. Anyone who applies themself should be able to become well-versed in “Creative Financing.”

CLICK HERE TO VIEW RESOURCES

Bruce Kellogg

Bruce Kellogg has been a Realtor® and investor for 40 years. He has transacted about 800 properties in 12 California counties. These include 1-4 units, 5+ apartments, offices, mixed-use buildings, land, lots, mobile homes, cabins, and churches.

Mr. Kellogg is a contributor and copy editor for two national real estate wealth-building magazines: Realty411, and REI Wealth Magazine. He is a recipient of an Albert Nelson Marquis Lifetime Achievement Award, listed in Who’s Who in America– 2019.

He is available for consulting with syndication, turnkey, joint-venture, and other property purchasers and note investors nationally, and other consulting assignments. Reach him at [email protected], or (408) 489-0131.

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