Wealth ENHANCEMENT Strategies I’ve Used Successfully

[Don Konipol]

Just celebrated 50 years as real estate investor!  I looked over my “files” and extracted 7 wealth “enhancement” strategies I used to accelerate my net worth.  Best I can figure, 50% of my estate is result of “straight up” investing, the other 50% the result of these strategies.  I’ve used others, but these had a more significant impact on my investing. 

1. Purchase 20% + below market value for cash when property can’t be financed

Buy truly below market by offering a very fast close, all cash, without the need for financing. To implement this strategy you need to have the full purchase price in readily accessible funds, so it won’t work for the majority of investors. Further, only a minority of sellers will be interested or motivated to offer a significant discount for an immediate no contingency sale.

2. Buy with seller financing with sweetheart terms ( assumable, 0% interest rate Seller Financed Note) and sell wrap note higher interest and or higher price for providing financing to buyers who would not qualify for conventional loans

Sell a property with an existing low interest mortgage utilizing a mortgage wrap. You’ll receive a higher price for the property because by offering seller financing you open up the bidding to a greater number of buyers. You create a note with an ultra high yield because you capture the interest rate differential between the stated interest rate on the wrap note and the lower interest rate on the underlying note.

3. Substitute a note purchased at large discount for seller financed note at full value (substitution of collateral)

Buy a property with seller financing at a low interest rate and long term and a substitution of collateral clause. Buy a note with a interest rate similar to the seller financed note at a large discount due to the relatively low interest rate and long term - and “substitute” this note for the seller financed note. You’ve just decreased your purchase price by the difference between the principal of the seller financed note and the “discounted” price you paid for the substitute note. Further, you now own a “free and clear” property you can borrow against should you desire and probably get all your invested cash out.

4. Use ability to finance at low interest rate to gain equity position

Negotiate for ownership interest in a property, with good cash flow from operations, but suffering negative cash flow from a high interest hard money loan that the owner can't refinance due to his personal credit limitations. Refinance using your good credit at 50% LTV and no personal guarantee. Negotiate the lender allowing a one time note assumption.

5. Work note

Purchase a low interest rate note at a significant discount to principal. “Work” the note by offering a smaller discount for payoff to the debtor, or by enticing an increase in monthly payments for a decrease in interest rate, which should if structured correctly increase you yield.

6. Business/Real estate combination

Purchase a business property such as an automotive repair shop. Purchase all heavy equipment needed for an automotive service business such as lifts, cranes, etc. Find an experienced operator wanting to operate in your location and sell him the business and lease the real estate to him. You can charge a hefty premium because with the shop fully equipped the operator saves the cost of outfitting the shop and the time and effort required. You can obtain a 12 cap or better on this type of situation.

7. Syndicate deal

Syndicate property or note acquisition and retain equity interest as “promote”