I would like to read an example of some of you guy's creative financing deal structuring you've put together with no &/or little of your own money down.
I'm posting this forum to get a better understanding of how this is possible & ideas I can potentially use to structure my first & for learning purposes on future deals.
How many partners used?
Bank, private, or hard money or all 3?
What was your stake in the deal after using others money?
SFR or MFR?
Long term or for the short term?
Percentages divided?
Who was in 1st & who was in 2nd position?
Thanks in advance.
Already posted about doing a development using a non-profit, having the Housing Authority kiss the seller financed note on 850K who also donated cash to the project to pay me getting a tax benefit and setting up the note through a charitable remainder trust on a partitioned note providing multiple beneficiaries of the estate with income and of course the payments didn't begin until after completion and sales/rents hit a level to sustain 6 months payments, so I won't go into that one again. But it was zero dollars from me.
Won't go into financing beyond the scope of this site, selling tax` credits, bond financing, participations or discounting bonds or annuities.......
Another was selling to a card dealer, we had a bit of a gap in the price and offer, he had less in a late model Pathfinder on his lot, so I took the SUV, I got some cash and a free vehicle.
Used boats the same way.
Used notes to trade for equity.
Took livestock after I had a buyer and the buyer pick up the livestock, I never saw them.
Another "system" was guaranteeing seller financed paper and leases, any default I step in and pick up the note/lease and I'm then buying the property or as an equipment lease, flipping it to an equipment buyer/lessor.
With that said, folks, you can't start thinking outside the box until you know what's inside the box.
You are really asking how can I buy without any money, many options are available but understand that not just anyone can start in what is truly innovative or creative without knowing how to buy with money, where you get it is a different matter.
Creative financing isn't getting an installment contract at 100% or even more without skills.
Land, labor, capital and entrepreneurship are the functions of economics, any three of land, labor or capital can be substituted to build a transaction but entrepreneurship is always applied. Less capital, more labor, less land, more labor, more capital less land or labor, no capital means more labor, land and management.
How do you do that, with an education, knowledge is power, what most here think is that knowledge can come in some 12 step program.....NOT!
Before you can be creative in financing you must first know conventional financing, there are rules and laws, you can't just dump out a box of ideas or agreements and expect something to work, you build the financing transactions just like you prepare a meal, one ingredient at a time ensuring each is added at the right time, just enough to provide the intended results while keeping within a legal and ethical framework.
You're never going to paint a master piece with a paint by numbers set. :)
One of my current deals, I talked the seller down from $3.7M to $2.7M, he carried a note back for $2M for 18 months at 6% and I had a private investor second trust deed note at $800k. Rehab was $650K, so I brought $550k plus holding costs to the table and was able to do a high end deal with just over 16% of my own captital and the owner carried note at 6% cut my interest on the first in half of what I normally pay private investors.
Another deal, purchased sub2 with a Wells fargo note balance of approx $160k, brought $45k cash to the table to close the purchase at $205K, and had a private investor 2nd for $80k which gave me $35k in my pocket at closing to cover almost 1/2 the rehab costs.
Funded my $750k spread deal (found here:) http://www.biggerpockets.com/forums/517/topics/795...
with private financing on a first trust deed for $750k, a private investor second for $400k and another private investor loan cross collateralized with another holding for an additional $400k. I came out of pocket for all holding and rehab costs which were around $400k which is about 20% of all funds needed for this project.
I can go on and on, but the moral of the story is, creative financing is best done for deals like this with owner carried notes and private lenders which you form good relationships with (and keep them by performing 100% of the time!).
I was young and newly married, was renting an apartment and had a minor disagreement with my landlord - looked at my wife and said "we're out of here, we're buying a house" we had no money for a down payment, but we owned a new car so I borrowed against the car and used that $10,000 for a down payment, borrowed the escrows from family, maxed out the credit cards buying applicances, it was a 2 family, and cashed out with a $300k profit 9 years later! Where there's a will, there's a way!
Days after graduating college and working for a real estate investor, I negotiated a land contract (much credit to my old boss and mentor). The deal spanned 3 years at a set interest rate proposed the the seller. The 4 unit multifamily was vacant and in shambles to the seller was having a hard time getting rid of the property. For the seller, this as a very risky option because I was a fresh college grad working a low income job with student loans to repay. But after some consideration, the seller agreed to meet me at a bar for a one on one interview. And make sure that if he entered into a 3 year contract with me that he would not be having to pursue foreclosure or take back a property in even more distress than it already was.
Over a beer, I explained to the seller how much I had learned managing properties throughout college; and although I did not have much financially, my credit was excellent and he was welcome to pull that information from the bureaus if it would help in his decision. Additionally, I had a good support system with my current employer in the same business and my boss as a close adviser.
We eventually came to an agreement with a little more down that what I had originally planned but not too much. I ended up with a vacant 4 family apartment building for $5500 down on a 3 year land contract for $60k @ 8% amortized over 30 years, meaning I would make regular monthly payments to the seller with a balloon payment due on or before the 3 year period. Once we closed with an attorney and had the contract recorded with the county I took the keys and began working to turn around the distressed property. I focused my energy on the unit that required the least amount of work up front as my goal was to get the units rented as quickly as possible. Fortunately, I was able to get 2 units rented within a matter of a couple months while I lived in one of the units as well. This allowed me to collect rent and continue to work add value to the property. Within a year I paid off credit cards, never missed a student loan payment, never missed a land contract payment and was netting positive cash flow with the property fully leased.
This is when I brought my scenario to a conventional lender and was able to secure an 80% LTV conventional loan that paid off the balloon payment over a year in advance. So I was able to take out some cash lower my interest rate and basically keep the same payment that I was making to the previous seller. Now I'm using that cash to fund future investments, but I've found going the owner occupied route allows you to closely manage the performance of the property by making the right repairs and controlling costs. I have since down one more deal this way and am looking to continue until my wife no longer wishes to share a home with a tenant (which is probably very soon!). My advise: keep very detailed records of updates/repairs because this will make it easier to see the increase in value to both the lender AND the appraiser. I always tell friends that sometimes find real estate projects or investment daunting or intimidating: you never know how hard or easy something is until you actually try it.
These stories are very interesting. Creative financing like this is one area I really haven't gotten into. I've basically gotten mortgages, partnerships, or used my own money.