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Table of Contents

Chapter 1: Introduction ------------------------------------------------------------- 3

Chapter 2: OPM-Other People’s Money --------------------------------------- 6

Chapter 3: Banks & Hard Money ------------------------------------------------- 8

Chapter 4: Seller Financing ------------------------------------------------------ 13

Chapter 5: “Subject To” Transactions --------------------------------------- 16

Chapter 6: Private Lenders ------------------------------------------------------ 24

Chapter 7: How to get Cash at Closing -------------------------------------- 26

Chapter 8: Conclusion ------------------------------------------------------------- 28



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CHAPTER 1 Introduction

Every investor who plans to do any significant volume in real estate must have a tool box filled with different financing techniques. Even the investor with a pot full of cash and superb credit will eventually exhaust both and be forced to seek out other avenues. If not, he will be limited to the size and number of deals that he can do. In fact, a savvy investor does not tie up his own cash and credit to complete deals in the first place. So the problem of financing deals requires a creative approach; in other words no banks!

There is also no rule that prevents the use of multiple strategies on one deal. The key is not to get stuck in a box, always think outside that box. So you cash-rich investors might argue that they would rather just use their own cash to save on interest and other fees. Ironically, in their quest to save money they are actually wasting it. The real wealth-building opportunities in real estate come from leveraging small amounts of cash to earn huge profits.

Consider this example:

Assumptions:

Total project costs per house:

$100,000

Turnover time 4 months (3x/year)

Cash on hand $100,000

Interest rate earned: 3%

Interest rate paid: 10%

Profit per project: $25,000

Investor A: Utilizes his $100,000 cash to cover project costs thus saving the interest costs. Since he can only turnover his money 3 times a year he is limited to only 3 projects for the year. His total profit for the year is:



Sale of Houses: (3 x $25,000) = Total Profit: $75,000

Investor B: The savvier investor retains his $100,000 in a liquid account and borrows the funds for the projects. He decides to borrow $300,000 allowing him to run 3 projects at a time which he can turn over 3 times a year. His annual profit is:

Sale of Houses: $150,000 (6 x $25,000)

Interest Earned: $ 3,000 (3% of $100,000)

Interest Paid $ 30,000 (10% of $300,000)

Total Profit $123,000

Investor B earns $48,000 more per year - a 64% increase - and still has access to all of his $100,000 in the case of an emergency. Which strategy is the more profitable? Which strategy carries less risk? Additionally, the number of deals per year Investor B can process is not restricted by his cash on hand.

The goal is to leverage as little resources as possible and utilize other peoples’ money and other people’s credit to control property. In the following pages you will discover various techniques that allow you to invest little or no cash of your own for all your real estate transactions. Even with minimal cash reserves you can earn huge profits from real estate. In fact, a knowledgeable investor with little cash can usually create a more profitable deal than a cash rich investor with no understanding of how to leverage his resources.

When you finish reading this report you’ll know how to secure financing for 100% of your project costs [Project Costs are the total cost associated with a deal and include Purchase; Rehab; and Buy/Sell/Hold costs) regardless of your personal resources.



Why Use Creative Financing?

1 Complete more deals without depleting cash on hand

2 Greater profits

3 Faster closings

4 Better leverage cash and credit

5 Unlimited access to funding.



Chapter 2 OPM – Other Peoples’ Money Let’s test your lending IQ. True or False? A nothing down deal means no money exchanges hands in order to purchase property? The correct answer is “False”. A nothing down deal simply means that you use OPM, other peoples’ money.

There are two ways to create financing for your project:

(1) traditional lenders such as banks and hard money lenders

(2) creative sources such as sellers, subject to loans, or private lenders.

What you must do is find the option that works best for you and your situation.

The key criterion to remember when weighing your loan options are:

Know what their credit requirements are

The amount they’re willing to lend and what’s their definition of value? Value can be either the purchase or the appraised price and appraised price can be as is or after repairs.

What kind of down payment are they requiring?

What interest and points they’re going to be charging.

Other requirements such as appraisals or surveys; when do they need to be done and by whom?

What’s the loan approval process? How long does it take? How much documentation do they need?

What about seasoning requirements? If you’re refinancing a loan, do they require the present loan to be in place for any length of time?



As stated before, a sophisticated investor has available multiple methods for financing a property. It is this tool box of diverse methods of financing a deal that creates opportunities for some investors where other investors face failure. The more techniques available to you - the more at your disposal - the greater the probability that you’ll be able to close the deal. “Nothing down deals” has been the real estate buzz word for decades, so many inexperienced investors confuse this to mean that even the seller is requiring no cash closing or the bank requires no down payment

These investors spend all their energy looking for these types of deal and become frustrated when they cannot be found. A nothing down deal does not mean that the bank requires no down payment or the seller is offering 100% financing. It simply means that the investor doesn’t need to use any of their own cash to create the deal. The goal is to use as many creative techniques as possible to avoid using personal cash. Locate as many sources for using other people’s money to increase your leverage and the total number of deals which can be completed.

Real wealth is made by leveraging your funds – using small amounts of your cash to earn huge returns. There are a few other advantages as well. You only have a small amount of your cash at risk. If anything were to come up during that project you have plenty of cash reserves to be able to take care of it. Also, consider this: an investor with only $10,000 and a lot of knowledge could complete the same deal as an investor who used $150,000 in cash in the same deal. So do you see why you don’t have to have a lot of cash to be able to profit from real estate transactions? This guide will show you how to have no cash involved in one of these deals. So even with no cash reserves you can still do these deals.

A lot of people think they’re going to save on the interest and on the points, but that’s like walking over dollars to pick up pennies. There’s no way to reduce expenses enough to begin to compare to the potential of leveraging those same resources. Leveraging your money is going to be critical. Utilizing other people’s money will create real wealth.



CHAPTER 3

Banks & Hard Money

The obvious first technique for financing your deal is to go with standard bank financing. This often provides one of the least expensive and longest term financing available. You can either go to a mortgage broker or go directly to the lender.

A mortgage broker can provide many more options. They can explain the pros and cons of various options available in the marketplace. The problem is that most of the deals are created with motivated sellers who need fast cash for house in poor shape. Banks are not known for their speed of approval, nor will they loan on a house that’s not habitable. Habitable that means that the house can support having the utilities turned on, in other words, it is safe to have the utilities turned on. It must also have a working kitchen and a working bath. If those items are missing in the house, typically a bank will not make a loan.

A traditional lender will also base their LTV values on the present as-is value, not the after repaired value. In fact we can go one step further; they’re going to base it on the purchase price, not the appraised value unless we’re talking about a refinance loan. So bank financing is great for properties you intend to hold for long term, which are already owned, and/or have already been renovated and are in good shape.

REFINANCING

Let’s discuss refinancing for a moment. Refinancing is simply obtaining a new loan financing to pay off a loan(s) that is already in existence on a property. During refinance the title to the property, ownership, does not change hands. That means that the Warranty Deed (which provides title to the property) remains in effect and is not altered.



Only the Deed(s) To Secure Debt change. Why do the Security Deeds change? Because you’re paying off the old lien holders, and the refinance lender places new liens on the property. The new lender pays off the old lenders, who will in turn satisfy their mortgages, so they can be removed from the records, allowing the new mortgage to assume the superior mortgage position.

The motivation to refinance a loan may be to reduce the interest rate, create more permanent financing, tap into the equity with cash out, or to pay off a loan that’s maturing with a balloon payment due. Banks base their LTV on a current appraised value of the home for a refinance. So if considerable value has been added because of the renovation you do, the larger loan can be obtained that was originally available.

If this difference is large enough, you could do a cash-out refinance. But remember if you have cash invested in the property that you wish to recoup, or if you want to pull out some of the equity through a cash-out refinance, you will need to verify that the loan program for which you are applying permits cash-out refinancing. Many programs do not allow cash-outs especially if the old loans have not seasoned very long, or if the new loan is non-conforming.

You also have to consider when you cash-out if the rent on the property can support the higher monthly mortgage payment created with the larger loan. Some people refinance a rental property, try to take out some of the equity, and then are surprised later because the monthly payments went up so much that now they can no longer afford the cash flow. They’re upside down, in other words, they’re paying more to the lender than they receive in rental income. Be sure to consider all of these implications prior to even purchasing the property, but definitely in advance of obtaining a new loan.

Another method of financing is to take out an equity line of credit. An equity line is a loan on the equity on the property. The funds can be utilized as needed, repaid, and utilized again therefore only paying the interest when the funds are actually in use.



the advantage of an equity line of credit is that you can have it in place ahead of time know that it’s already approved and ready for use, but no interest accrues until the money is actually in use. You don’t have to qualify for it every time you want to use it, pay it down again, not use it for a while, and it will still be available when needed again. It is immediate cash for which all you have to do to access the funds is write a check to be used as part of the purchase price, for your holding costs, your closing costs, for rehab expenses, or for whatever is needed. And it’s immediate.

HARD MONEY LOAN

Many investors finance their deals with a hard money loan. A hard money lender is a quick, fast, flexible approach to financing, but it is a little more costly. A hard money lender makes loans to real estate investors, and understands that the properties will not be in the best shape. They also realize the closing must occur relatively quickly. Their loan decisions are somewhat based on credit scores; with more emphasis, however, placed on the viability of the deal.

They’re looking to make sure that the borrower has some credit-worthiness, but it’s the strength of the deal that will be the determining factor.

Another benefit is that for determining the Loan-To-Value (LTV) ratio, the hard money lender utilizes the value of the property after the repairs; the bank uses the purchase price – a significant difference.

Another difference is that the traditional lender will generally (except for some special programs with very involved paperwork) only provide loans towards the purchase price of the property. A hard money lender will allow proceeds from the loan to be used to make repairs. Most hard money lenders, however, will escrow the repair funds and release them as the renovation is completed. You’ll need to have enough working capital to get the work done until you receive repair escrow releases. Some lenders have a release fee charged for each escrow draw. Be sure to identify these costs before accepting the loan.



Hard money loan closings can typically occur within ten days to two weeks, sometimes even sooner. These are costly loans, but they provide quick easy money for ugly houses.

As mentioned before, hard money lenders play a crucial part in the financing of all your deals? Regardless of what other sources you have there will come a point in time where eventually you will need to go to hard money lenders. What I recommend is early on find all the hard money lenders in your area to get pre-approved with them and find out what their requirements are and what it’s going to take to get approved.

So how do you find a hard money lender? first visit the local real estate investors association– you can locate local members by going to www.nationalreia.com. and ask other investors at the meeting about who the hard money lenders are, and obtain references on them as not all hard money lenders are created equal

Things to consider when choosing a lender

How quickly can they close Do they have cash-in-deal requirements

Type of loan to value Is a survey required and who will do it

Types of property they will make a loan on Appraisals and termite inspections required

Minimum/maximum loan amounts Is an attorney or closing agent required



Prepayment penalties What are their rules on escrow uses

The reason you want to know all these things in advance is to compare costs, but also so that you can move quickly to meet all the requirements after applying for a loan, thus avoid creating any delays.

Remember to have several lenders that you have interviewed, are comfortable with their program, and with whom you’ve been pre-approved so when an opportunity is available you can move quickly to obtain your funding.

If you purchase wholesale deals from other investors who are assigning their rights to the underlying Purchase and Sales Agreement (PSA), recognize that traditional lenders do not recognize Assignments. They require the PSA to be between the borrower and the seller of record. Hard money lenders usually allow loans proceeds to be used to pay assignment fees, but often have a cap on the amount.



CHAPTER 4 Seller Financing

The benefits of seller financing are that of all the terms are completely negotiable. Since sellers aren’t regular lenders they don’t have predetermined terms in their minds. The financing is already available. The house is paid. All that is left for negotiating are the terms. There’s no loan process. No qualification process. No application process. And the approval is complete as soon as they agree. Because the seller is already familiar with the property, they are less afraid to use their house as collateral. However, they must be assured that they will never get that property back. It is a headache to them, and they do not want to hear that they could get it back if payments were not made. They must be convinced that the loan will be short term, will be paid timely, and with no problems.

These loans are perfect, especially if you need very short term financing: thirty to ninety days. Short term seller financing allows for easy purchase of the property. The re-sale could occur within fourteen days and the investor buyer would not see the profit made. Proceeds from that sale would be used to pay off the seller.

Don’t be afraid to ask for a term of six months even a year, a lot of sellers will do that. When you discover sellers who have a significant amount of equity in the property, instead of offering to pay all of it at closing, do some probing to determine if they’ll provide some seller financing. Try offering a small down payment at closing, and the balance either paid monthly with a balloon at some point in the future, or better yet, no monthly payments and a larger balloon payment when the property sells.

Or offer a couple of payments for instance $5,000 down, another $5,000 in six months and the $40,000 balance at the end of the year. Depending on your exit strategy, you’ll determine when the balloon payments would make the most sense. For instance, if the plan is to



wholesale the property, make the balloon payment of the balance due fairly soon, less than ninety days, to make it easier to convince the seller. If the plan is to renovate and sell the house on the resale market, negotiate for repayment to be six months, twelve months whatever is a safe timeframe?

Another approach is to explain to the seller that you are trying to pay the highest dollar amount possible for their house. If they could help by allowing you to make payments over a short period of time, you’ll be able to offer the highest dollar amount possible.

If they bring up charging interest on the loan (most sellers don’t), then let them know that if interest is required, the price that can be paid for the house will need to decrease. The point is for you to reduce the total cash required by having the seller fund some of this purchase price. So don’t worry too much about the interest.

Once the seller has agreed to the financing and the terms, it needs to be written on the Purchase and Sales Agreement so later there’s no question as to what was agreed upon.

Anytime you’re negotiating a deal and you realize that the seller will receive a significant amount of equity back at closing you should really be thinking about seller financing. And by using your technique to place their loan in a subordinate position, their loan could make the difference on having 100% of your project costs covered.

After you repay the loan, offer the seller to invest those same funds in another one of your projects, in other words turn them into a private lender for yourself for all your other projects. If they don’t need the funds previously, chances are they still may not have a need, and you’ll have a ready proven system that works well with them. They’ll see how they have their money invested and returned. And now you’ll offer interest as an incentive for future investments. I offer the idea of private lending to sellers even if they don’t accept seller



financing. Often, they just don’t want to have anything to do with their old house, but are willing to invest in a new property.



CHAPTER 5 “Subject To” Transactions Once upon a time there was something known as assumable mortgages in which the lender allowed for a new buyer to “assume” the existing mortgage on the property - take over the terms of the loan - without having to qualify with the original lender. This is obviously an easy way to finance a purchase. Unfortunately these loans which were either FHA (Fair Housing Authority) backed, or VA (Veterans’ Administration) backed were discontinued back in 1988 and 1989, which means that finding these loans in the marketplace is almost impossible and if they exist the loan balance is so small that there is little benefit.

Everybody thought that if you were to take over one of the NENQs that the seller has no responsibility - that’s not true. The way they were set up is if the buyer assumed one of the mortgages and do not qualify with the lender, the seller was still responsible for the next five years. If during that next five years, the buyer does not make payments, the Lender could still recoup losses from the original borrower. So it wasn’t such a great deal for the seller as many have always thought. The seller still has a fair amount of risk.

There’s another technique you can use that’s very similar: “subject to” financing. When a property is purchased subject to the existing mortgage that means that the mortgage stays on the property, and the buyer begins making the payments – however the loan remains in the name of the original borrower. In other words, title to the property transfers to the buyer, but the loan remains in the original borrower’s name until it is paid off. Although the buyer assumes no legal responsibility for the loan, in practice, if you purchase a property subject to the mortgage, you must treat it with the same level of responsibility as if the loan were in your name for several reasons:

The lender could foreclose on the property To protect your reputation with the seller



To avoid new legislation which will prevent these purchases It is morally correct To avoid litigation with the seller

The original borrower, the seller, remains legally responsible for the loan, and you make the payments. Negotiating this technique with the seller is easiest when they’re already behind in their payments and foreclosure is around the corner. Emphasize the point to your prospect that you will be making all of their back payments, and you will also make timely payments going forward. And since the loan remains in their name, it is their credit report which will actually benefit.

You can also negotiate this technique effectively with anyone who is motivated to get out from under their house for any reason. Remember the concept to remember here is to make sure that you are always dealing with a motivated seller.

By now you’re probably asking yourself, how you take over these payments. Are these loans assumable? These loans are not assumable. Most mortgages are not assumable and have what’s called a due-on-sale clause which states that if the borrower sells the property, transfers title without paying off the loan or obtaining the lender’s written permission for the purchaser to assume that loan, then the lender has the right to call the entire note due: the full balance. And while this is an inherent risk in this type of transaction, the probability of the lender exercising this right is minimal.

Some believe that this type of transaction is actually illegal. There is nothing in the mortgage document that makes this type of transaction illegal; it simply gives the lending institution the right to call the loan due. Some states are attempting to pass legislation to make subject to purchases illegal; or if not illegal to place constraints on the way the transaction has to be set up and the required disclosures to the seller. Check with legal counsel for your state to make sure that you can still do these transactions, and whether there are any requirements regarding execution of the transaction.



Assuming that there are no laws preventing or restricting your ability to purchase properties subject to the existing mortgage, the next question is whether the lender will exercise their right to call the loan due.

Note: This whole process works when the lender is an FDIC regulated bank.

A bank wants to keep as much of their money invested in the marketplace as possible. When a loan is not being paid on time the federal government requires banks to place additional funds in reserves. This amount is three to eight times the loan amount based on the bank’s credit rating. So if they called a $100,000 loan due, they would be required to place an additional $300,000 - $800,000 in reserves which could not be loaned out thus significantly reducing their profits.

There is no motivation for the bank to call a performing loan due, thus placing it in a non-performing status and greatly reducing their lending ability. Banks are in the money business – not the real estate business. The last thing they want is a property.

Once the seller is convinced that subject to financing will work for them - in fact, it’s actually a benefit for them, and the due-on-sale clause has been fully explained, they will need to sign a Disclosure form.

Although the Disclosure form is somewhat counter-productive to obtaining seller consent for this type of financing, there are a few reasons to have the seller sign it:

To ensure they fully understand the transaction: the fact that the loan will stay in their name for an unspecified period of time, and that the lender has the option to call the loan due because the title has transferred



To protect you in case the seller later contends that they do not have knowledge or understanding of the transaction

States are moving towards requiring a Disclosure. It is better to have it in advance.

Sample Disclosure Form:



It is important to fully disclose the risks to the seller as well as the benefits. If you are speaking with a truly motivated seller, they will realize that the benefits significantly outweigh the risks.

Let’s discuss the logistics of writing up and creating a subject to deal. Simply write in the normal purchase price, and add into the Agreement this verbiage:

It is important for the seller to understand that you’re giving them approximate numbers which will have to be confirmed by the lender for closing. If any of the numbers change, so will the amount they will receive at closing. You should also write in the monthly PITI (Principal, Interest, Taxes, and Insurance) payments of $xxx. You will want to verify that the payments do include taxes and insurance. If not, those are additional expenses you need to consider in your financial projections. By listing the payment amount on the PSA, if you later discover that the amount is significantly different, you are not bound to the purchase.



Remember that when you’re working with the monthly mortgage statement the principal balance is not the full amount currently owed on the loan. It does not include back payments owed, additional interest, attorney fees, and other charges. Sometimes the seller will have a letter from the foreclosing attorney which lists the total payoff amount due good until some specified date. This number is usually accurate but you should always verify the numbers prior to closing. Regardless of the information provided to you, always write “approximately” on your PSA to protect yourself if the numbers change. You are only bound to the total purchase price listed.

That’s all it takes to create a subject to transaction on your PSA. Once the seller has signed the PSA, ask them to also sign the disclosure statement.

Ask the closing agent to obtain a statement of account prior to closing to protect you from any surprises. This is not a payoff letter. It is a statement from the lender, valid at least through the date of closing, which provides a financial review of the loan as of the specified date. The purpose of this letter is to provide an indisputable accounting of the outstanding balance of the loan as of the date you assume financial responsibility. It will include the principal balance, past due payments, late fees, attorneys’ fees, additional interest due, and any prepayment penalties that may exist. By obtaining this information you are certain of exactly what’s owed on the loan. And if the property was in pre-foreclosure, be sure the closing agent obtains a “loan reinstatement” letter from the foreclosing attorney or lender to ensure the lender does proceed with the foreclosure proceeding.

Ask the seller to bring the payment book or coupon to the closing so timely payments can be made. All future correspondence should be received by you directly from the lender, so prepare a letter to the lender from the seller, the original borrower, stating that you or your company will be handling all activities related to the loan and that all future correspondence should be directed to you. Provide your mailing address and contact information. The letter should also authorize you to act in all ways for the loan. At closing, ask the seller to sign two original copies of the letter and mail one of the originals



to the lender. The reason to obtain two originals is the lender invariably loses the first one, so copies can be made from the second.

The Performance Mortgage To make wholesale deals more attractive, you may want to pass on the subject to financing to your buyer. You do, however, need to protect the seller since you’ve given your word those payments would always be made in a timely manner. Have the closing agent place a performance mortgage behind the subject to loan. The performance mortgage is simply a second mortgage on the property for $1.00 which states:

The 1st mortgage must be satisfied in order to satisfy this mortgage

The mortgage has to be satisfied within xxx year(s).

Any default on the first mortgage would automatically create a default on the second mortgage (the cross-default clause).

The performance mortgage controls the property and protects the seller if the investor buyer doesn’t make timely payments. It forces the original loan to be repaid within a specified period of time so it doesn’t hang out there indefinitely.

Wrapping A Mortgage A variation on subject to financing is to wrap the underlying mortgage. A wrap mortgage is one in which new financing is wrapped around the existing loan. Typically monthly payments are made to the mortgage holder (the seller) who in turn is responsible for paying the underlying loan. In this example the payments would be made to the seller and the seller would pay the underlying loan at the bank and keep the difference themselves. As a protection, the mortgage should be set up to allow you to pay the underlying loan payments directly to the lender, with a separate check for the Seller’s difference. You do not want to rely on the seller making the timely bank payments instead of using the funds for other purposes, resulting in the lender initiating foreclosure proceedings. By wrapping the mortgage, the seller creates the right to foreclose on the entire balance if timely payments aren’t made. This technique can



be a good suggestion if you find a seller that is resistant to the subject to financing because they would have no control in the future if something went wrong. By creating a wrap mortgage, the seller feels more protected, yet it accomplishes the same financing for you as the subject to. Just be sure to have an agreement that payments will be made directly to the bank and not the seller.



CHAPTER 6 Private Lenders Private lenders are individuals who typically do not make real estate loans. They will consider investing in your projects because they are motivated by higher returns on their investment than they currently achieve, and because the investment is secured. The advantages to you, the investor, of using a private lender is that the terms are completely negotiable. In fact, since these individuals are not in the lending business so it is likely that you will typically propose the terms to them.

There is quick availability of funds because they are typically held in liquid assets until you’re ready to invest. There is no qualifying process for each loan: once you convince someone to become a lender for your projects, they will typically reinvest over and over based on your recommendation. In other words, after they commit to working with you, the approval process for each loan is a call from you requesting a loan for a new project.

Private lenders represent an unlimited supply of investment funds – not because each lender is so cash rich, but because you continue to add additional private lenders to your portfolio so you never run out of cash for investments again. The loans do not show up on your credit report, so they don’t affect anything else that you’re doing.

Great sources for private lenders are individuals with IRA accounts. They typically are earning 1-2% interest and often mistakenly believe that those funds are tied up until retirement age. The fact is that they can rollover their IRA into a Self Directed IRA and suffer no penalties. Once the funds are in a Self Directed IRA they are free to make loans for your real estate deals at a substantially higher rate.

IRA owners are usually more inclined to loan those funds because they are detached from the money. They don’t have personal access



to the money until retirement age. Additionally, since they can’t tap into the money, it is easy to negotiate a higher interest rate paid in exchange to have the principal and all accrued interest not due until

you sell the property. This means you will have no monthly payments and will be able to make all payments from the proceeds of the sale.

One final thought on private lenders is to be sure to treat them like gold, because they are gold to you. They will become your major source for financing deals. Never make them wonder about the security of their funds; and never, ever let them lose money in one of your deals. Always make sure all of their principal and interest is returned. It is a small community out there, and if your reputation is tarnished future loans will be difficult.



CHAPTER 7 How to Get Cash at Closing There are a lot of different techniques for financing your deals. It’s up to you now to be creative with how you are going to implement those techniques to fund all of your projects. There is no requirement that you finance a property with just one tool. Mix and match to create the best deal for you given the available resources. Let’s look at a deal:

After Repair Value $190,000 Purchase Price $115,000 Loan Balance $ 95,000 Seller Equity $ 20,000 Rehab $ 18,000

Let’s determine a possible way to finance this deal. We need a total of $133,000 to cover purchase plus rehab costs:

Subject to financing $ 95,000 Seller financing $ 10,000 Financing Created $105,000

So we have already created $105,000 of financing right in the Purchase & Sale Agreement. However, we are still short, so we add another technique: Private Lender. Financing Created $105,000 Private Lender Loan $ 35,000 Total Financing $140,000 Project Costs $133,000

Additional Funds Available $ 7,000

Only $133,000 was required to cover the Purchase plus Rehab costs, but now we have created $140,000 in financing leaving a balance of $7,000. That $7,000 will be available to you at closing to be used for



other expenses that will arise from this project: closing costs; mortgage payments; utilities; insurance, etc. Just be sure to disclose to your lender that their funds may be used towards the purchase, the rehab, or other project costs.

Note: These additional funds are NOT profit and should not be moved form your business account to your personal account. These funds are to be used strictly for the project for which the lender agreed.

As an investor you should build a portfolio of private lenders that you can use for all your projects. You will be amazed at how many more deals you will be able to complete and how quickly your profits increase.



Chapter 8 CONCLUSION If you don’t have to come up with any of your own money, and could use other people’s money to fund 100% of the project costs, how many of these deals could you afford to complete in a year? It’s really unlimited other than your time, but could you easily do ten. Of course. And you’ll have purchased $1,000,000 of real estate using other people’s money.

You can create numerous different scenarios depending upon your resources and the seller’s flexibility. The goal is to find the lowest cost funds, with the most ease of access, and with the least impact to your credit report. All of these factors should be considered as you create your financing. Use multiple techniques, really be creative and think through how you can get not only a 100% financing for the purchase price, but how you get a 100% financing for the entire project cost.

Sit down, analyze how much total cash you will need to fund the entire project, and then work on obtaining the total financing. This is great business. There are many ways for you to be able to fund your deal. Remember the way real wealth is made is by leveraging your resources and using a limited amount of your personal resources to control large amounts of real estate and earn huge profits.

Documents

CloseYourNextDealcertifiedinvestors.s3.amazonaws.com/ci-reports/FinancingRealEstate.pdf · DISCLAIMER AND TERMS OF USE AGREEMENT ... Even though this industry is one of the few where