All Forum Posts by: Derek Dombeck

There is not a creative financing contract. You use a standard purchase contract and write the terms of the seller financing in an addendum. 

Your 1st challenge is to get educated about how to talk to potential sellers about their property in a way that they will be open to a terms offer. This comes way before the contract as far as importance.

Creative deals aren't found, they are made from conversations with motivated people and from you solving their real estate problems.

As long as you understand the terms of the loan and have a back up plan to pay it off if it ever was called due, go for it. You can negotiate the future advance into your overall deal as long as the seller is willing. I also often pay the remainder equity in an installment sale using a note and mortgage. In the last month, I've  done this with a zero percent seller 2nd twice. If you don't ask, you do not give them the opportunity to say yes.

@Andy Sabisch,

That is why I target the smaller retirement account holders for these deals. They typically have 50 - 100k and may not have the options to get the higher returns. Furthermore, many of them do not require monthly payments as they do not live off the proceeds. If the deal can afford accumulating interest, we may structure it that way.

If you are not finding this type of available money, change your audience.

Break even deals typically do not really break even because most people underestimate the actual cost of holding a property. I NEVER buy unless it cash flows because the last time I bought on appreciation (2006) I went broke.

I like to bring in small self directed IRA or Solo 401k owners. I give them an interest only payment of 6% to 8% plus a percentage of the equity when I sell or refinance. I do this utilizing a participation note and mortgage. The same thing can be accomplished by selling part of the deal as an Option. This way, you are not taking on debt.

True hard money lenders likely will not want to be in 2nd lien position to an institution. This is more likely to happen with a private party. I own a hard money lending company and have been asked to do this may times. My advice is always the same. Go find some people who have fairly small self directed IRA's and give them a fair return to be in 2nd position. I do this structure often myself. Sometimes, I will give them a rate of interest AND a percentage of the equity when I sell or refinance using a participation note and mortgage. You can also sell part of the deal as an Option to raise the cash needed. That way, it is not debt with a payment attached to it.

There are multiple strategies not yet mentioned. I try to avoid using banks unless I have to. Instead, I focus on sub-to purchases, wrap around notes/mortgages, master leases, options, lease/options, participating notes with financial friends to fund rehabs, land contracts, installment sales, or using private capital partners. You can stack several of these strategies together on the same deal as well. My favorite source for all things creative is cashflowdepot.com
Focus on studying Pete Fortunato, Jack Miller, David Tillney, Bill Cook, and Dyches Bodiford 1st.

As a lender of hard money, we give landlords short term loans all the time. They can get in with little down and after the property is renovated and has tenants, they get refinanced and often recoup all their cash.

That said, I think you have better options available. Get yourself educated in marketing direct to the property owners. When you can talk too and find out what a sellers true needs are, you can create a good deal using creative deal structures. Educate yourself in using Options, Leases, Sub to purchases, Master Leases, Land Contracts, Installment sales via a note and mortgage and you may realize you do not need banks to build a portfolio at all. Reach out directly if you have questions. I am happy to help.

If you have ever considered becoming a private lender or you want to buy existing short term notes, reach out to me today! Our Lending company is thriving and we are seeking lending partners. You can get great passive returns without tenants and toilets or having to deal with contractors! We are a WI based company with a great track record and a lot of experience.

It's fairly common for a seller to leave money in an escrow account for repairs after closing. Usually, a title company or attorney will hold and release the funds at the appropriate time.