Creative Financing For Buyers & Sellers

1 BTi, Inc. © 2008

Continued Success on Your Path . . .JD & Suzanne Morris

Ideal 4 Investors

Wednesday Night Online Seminar Series

March 12, 2008 Creative Financing

StrategiesFor Buyers and Sellers

www.ideal4investors.com □ (877) www.ideal4investors.com □ (877) 825-3508825-3508

2 BTi, Inc. © 2008

March 19Short Sale Property Tour

Wednesday Night Online Seminar Series

Online Seminar: April 16Investing Your IRA in Real

EstateWith Lisa Moren Bromma

Author & Special Advisor to the Entrust Groupwww.ideal4investors.com □ (877) www.ideal4investors.com □ (877) 825-3508825-3508

Suburban Atlanta Pre-Filled Lease OptionSuburban Atlanta Pre-Filled Lease Option

Purchase Price - $189,680 Builder Paid Closing Costs – Up To $5,690 Future Sale Price - $214,338 (lease purchase in place)Option Payment - $10,717 (100% yours to keep)

Monthly Rent - $1,664 (lease is in place)Your Estimated Monthly Payment - $1,362Estimated Monthly Cash flow - $136Total Estimated “Out of Pocket” After Move in - $11,352

$18,899 Year 1 Gross Profit$18,899 Year 1 Gross Profit

Order Your Free Investment Guide:Order Your Free Investment Guide:

www.ideal4investors.com □ (877) www.ideal4investors.com □ (877) 825-3508825-3508

CreativeFinancing

Strategies

CreativeFinancing

StrategiesFor Buyers & SellersFor Buyers & SellersFor Buyers & SellersFor Buyers & Sellers

presented by

Bill TanBill Tan Investments, Inc

presented by

Bill TanBill Tan Investments, Inc

5 BTi, Inc. © 2008

Contact MeContact Me

Bill TanBT Investments, Inc

(760) [email protected]



6 BTi, Inc. © 2008

Let’s Think…Let’s Think…

How do you pay forHow do you pay forreal estate purchases?real estate purchases?

CashCash

LoansLoans

7 BTi, Inc. © 2008

Let’s Think…Let’s Think…

How do you pay forHow do you pay forreal estate purchases?real estate purchases?

CashCash

LoansLoans

OtherOther

8 BTi, Inc. © 2008

First…First…

You mustdevelop an interest

in your fellow man.

You mustdevelop an interest

in your fellow man.

Care about the peopleas you listen to them.

Care about the peopleas you listen to them.

9 BTi, Inc. © 2008

Keep In MindKeep In Mind

“People don’t care how much you know

until they know how much you care.”

“People don’t care how much you know

until they know how much you care.”

10 BTi, Inc. © 2008

People & BusinessPeople & Business

If the sellers are afraid, they won’t do business with you.

If the sellers are afraid, they won’t do business with you.

Make people feel secure & they will do business with you.

Make people feel secure & they will do business with you.

11 BTi, Inc. © 2008

Think On ThisThink On This

“Real Estate is athinking man’s game,

not a runningman’s game.”

“Real Estate is athinking man’s game,

not a runningman’s game.”Chuck ChathamChuck Chatham

12 BTi, Inc. © 2008

ClarifyClarify

Define what the problem is

AND

make sure the sellers

understand their problem.

Define what the problem is

AND

make sure the sellers

understand their problem.

13 BTi, Inc. © 2008

Problem SolvingProblem Solving

1.1. Write downWrite downa proposed solution a proposed solution without consideringwithout consideringits feasibility:its feasibility:then set it aside.then set it aside.

14 BTi, Inc. © 2008


2.2.Come up with at least twoCome up with at least twomore proposed solutions. more proposed solutions. •• Be sure to think them through carefullyBe sure to think them through carefully

& individually and write them down also. & individually and write them down also. •• You want multiple possibilities in case You want multiple possibilities in case

one solution won’t work. one solution won’t work. •• If you spend time thinking about a If you spend time thinking about a

problem: you come up with better problem: you come up with better solutions, you improve the solutions and solutions, you improve the solutions and make them safer.make them safer.

15 BTi, Inc. © 2008


3.3. Write down the benefits for the Write down the benefits for the sellers and you.sellers and you.

4.4. Write down the documents that will Write down the documents that will be necessary to transfer the be necessary to transfer the property in your deal.property in your deal.

5.5. Determine which solution is most Determine which solution is most feasible and go out and implement feasible and go out and implement the most feasible solution.the most feasible solution.

16 BTi, Inc. © 2008

Note!Note!

DO NOT MENTION MONEYDO NOT MENTION MONEY

IN ASSOCIATION WITH THE IN ASSOCIATION WITH THE

SELLER’S EQUITYSELLER’S EQUITY

BECAUSE YOU DO NOT WANTBECAUSE YOU DO NOT WANT

THE SELLER TO CONSIDERTHE SELLER TO CONSIDER

THEIR EQUITY AS MONEY.THEIR EQUITY AS MONEY.

DO NOT MENTION MONEYDO NOT MENTION MONEY

IN ASSOCIATION WITH THE IN ASSOCIATION WITH THE

SELLER’S EQUITYSELLER’S EQUITY

BECAUSE YOU DO NOT WANTBECAUSE YOU DO NOT WANT

THE SELLER TO CONSIDERTHE SELLER TO CONSIDER

THEIR EQUITY AS MONEY.THEIR EQUITY AS MONEY.

17 BTi, Inc. © 2008

Another NoteAnother Note

SELLERS ARENOT MONEY LENDERS.

They are selling an asset &EXTENDING CREDIT,

NOT CASH.

SELLERS ARENOT MONEY LENDERS.

They are selling an asset &EXTENDING CREDIT,

NOT CASH.

18 BTi, Inc. © 2008

A Quote To UseA Quote To Use

“USE WHAT YOU HAVE,

TO GET WHAT YOU NEED,

TO GET WHAT YOU WANT.”

“USE WHAT YOU HAVE,

TO GET WHAT YOU NEED,

TO GET WHAT YOU WANT.”

Mike CantuMike Cantu

19 BTi, Inc. © 2008

IdeasIdeas

1.1. Paper OutPaper Out

Financing the Down PaymentFinancing the Down Payment

Creation of WealthCreation of Wealth

Share the WealthShare the Wealth

Shared Appreciation MortgageShared Appreciation Mortgage

2.2. Blanket MortgageBlanket Mortgage

20 BTi, Inc. © 2008

IdeasIdeas

3.3. PartnersPartners

Owners/RentersOwners/Renters

Down paymentDown payment

Monthly payments orMonthly payments or

negative cash flownegative cash flow

Financial statementFinancial statement

4.4. Substitution of CollateralSubstitution of Collateral

21 BTi, Inc. © 2008

IdeasIdeas

5.5.Life Insurance policyLife Insurance policy

6.6.Assume the Seller’s ObligationsAssume the Seller’s Obligations

7.7.Use Talents or ExpertiseUse Talents or Expertise

8.8.Split off part of the propertySplit off part of the property

9.9.Refinance “things”Refinance “things”

10.10.OptionsOptions

22 BTi, Inc. © 2008

3 Ways To Help3 Ways To Help[and Profit!]

[and Profit!]

Seller FinancingSeller Financing

Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout

Wraparound MortgageWraparound Mortgage(AITD or ‘All Inclusive Trust Deed’)(AITD or ‘All Inclusive Trust Deed’)

23 BTi, Inc. © 2008

The ARM AlarmThe ARM Alarm

24 BTi, Inc. © 2008

A Quote Of NoteA Quote Of Note(s)(s)

“If you can’t find notes,

make them.”

“If you can’t find notes,

make them.”

Jimmy NapierJimmy Napier

25 BTi, Inc. © 2008


Program BasicsProgram Basics Property must be purchased at Property must be purchased at

50% LTV or less50% LTV or less

Property can’t be trashedProperty can’t be trashed

Buyers must have sufficient Buyers must have sufficient incomeincome

26 BTi, Inc. © 2008


A Sample Scenario A Sample Scenario

Purchase a $400,000

property in foreclosure

at retail for $200,000

Purchase aPurchase a $400,000$400,000

property in foreclosureproperty in foreclosure

at retail forat retail for $200,000$200,000

27 BTi, Inc. © 2008

Seller FinancingSeller Financing Breakdown: Investor CostsBreakdown: Investor Costs

hard money loan $200,000

points and fees $10,000

holding costs $10,000

taxes, utilities, insurance $6,000

rehab costs $20,000

closing costs $34,000

TotalTotal $280,000$280,000

28 BTi, Inc. © 2008

Seller FinancingSeller Financing Breakdown: Property Sale CostsBreakdown: Property Sale Costs sale price $400,000 down payment $20,000 1st mortgage (Trust Deed)

30 years at 8% — due in 10 years30 years at 8% — due in 10 years 2,568.2,568.1818/month — $307,035./month — $307,035.7373 balloonballoon

$350,000

2nd mortgage (Trust Deed) 10 years at 10% — interest only10 years at 10% — interest only $250.$250.0000/month/month

$30,000

Buyer’s Credit ScoreBuyer’s Credit Score 600+600+

29 BTi, Inc. © 2008

Breakdown: Investor StepsBreakdown: Investor Steps sell property $400,000 create 1st mortgage $350,000 sell 1st mortgage

this pays ALL costs! this pays ALL costs! (hard money, rehab, sales costs, (hard money, rehab, sales costs,

etc)etc)

$280,000

carry 2nd mortgage (= $250/month!)(= $250/month!) $30,000 collect your cash!collect your cash!

down payment from 1st (= cash (= cash profit!)profit!)

annual income from 2nd (= cash (= cash flow!)flow!)

(now & later)(now & later)$20,000$20,000 nownow

$3000$3000 annuallyannually


30 BTi, Inc. © 2008

Seller FinancingSeller Financing If you do just one deal each month, If you do just one deal each month,

here’s what happens over time…here’s what happens over time… 1st year

12 deals * $20,00012 deals * $20,000 12 deals * $3,00012 deals * $3,000

profit$240,000 $240,000 cash now!cash now!

$36,000/year $36,000/year cash flow!cash flow!

3rdyear 12 deals * $20,00012 deals * $20,000 3 years * $36,000/year3 years * $36,000/year

more profit$240,000 $240,000 cash now!cash now!


in comparison,…in comparison,…to create that much passive income with ‘traditional’ rentals, an investor would need to rent out…

value neededvalue needed$108,000

÷ 3.5%= $3,085,714

…of free and clear properties! (yes, that’s 3 million!)

31 BTi, Inc. © 2008

Seller FinancingSeller Financing If you do just one deal each month, If you do just one deal each month,

here’s what happens over time…here’s what happens over time… 1st year

12 deals * $20,00012 deals * $20,000 12 deals * $3,00012 deals * $3,000

profit$240,000 $240,000 cash now!cash now!


3rdyear 12 deals * $20,00012 deals * $20,000 3 years * $36,000/year3 years * $36,000/year

more profit$240,000 $240,000 cash now!cash now!


in comparison,…in comparison,…to create that much passive income with ‘traditional’ rentals, an investor would need to rent out…

value neededvalue needed$108,000

÷ 3.5%= $3,085,714

* passive income after just 3 years

* passive income after just 3 years $108,000$108,000

$108,0003.5%

* Investors commonly use 3.5% as an average estimate for expected net ROI* Investors commonly use 3.5% as an average estimate for expected net ROI

…of free and clear properties! (yes, that’s 3 million!)

32 BTi, Inc. © 2008


Program BasicsProgram Basics 11stst and 2 and 2ndnd in default in default

Work with owners to sell house Work with owners to sell house on a short saleon a short sale

Looking to get a discount of Looking to get a discount of at least 85-90% on 2at least 85-90% on 2ndnd

33 BTi, Inc. © 2008



Purchase a $100,000Purchase a $100,000

note for $5,000note for $5,000

and make $30,000and make $30,000

Purchase aPurchase a $100,000$100,000

note fornote for $5,000$5,000

and makeand make $30,000$30,000

34 BTi, Inc. © 2008

Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout Breakdown: Scenario $Out Breakdown: Scenario $Out && $In $In

property value 11stst mortgage mortgage

22ndnd mortgage mortgage

$300,000$200,000$200,000$100,000$100,000

buy 2nd mortgage - $5,000

‘short sale’ of property + $260,000

pay off 1st + closing costs $200,000 + $25,000$200,000 + $25,000

- $225,000

collect your cash!collect your cash! $30,000$30,000

35 BTi, Inc. © 2008

Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout Breakdown: Scenario $Out Breakdown: Scenario $Out && $In $In

property value 11stst mortgage mortgage

22ndnd mortgage mortgage

$300,000$200,000$200,000$100,000$100,000

buy 2nd mortgage - $5,000

‘short sale’ of property + $260,000

pay off 1st + closing costs $200,000 + $25,000$200,000 + $25,000

- $225,000

collect your cash!collect your cash! $30,000$30,000

- in default -- in default -

- in default -- in default -

($ out)($ out)

($ in)($ in)

($ out)($ out)

($ in… your pocket!)($ in… your pocket!)(that’s net profit!)(that’s net profit!)

36 BTi, Inc. © 2008

Wraparound MortgageWraparound Mortgage

Program BasicsProgram Basics Fully amortized, low-interest mortgage Fully amortized, low-interest mortgage

on propertyon property

Purchase property for zero moneyPurchase property for zero moneydown, subject to existing loandown, subject to existing loan

Sell property with higher interestSell property with higher interestrate and longer term financingrate and longer term financing

37 BTi, Inc. © 2008



Purchase a $500,000Purchase a $500,000

SFR for $0 downSFR for $0 down

and make $638.and make $638.4545/mo/mo

PuPurcrchase a hase a $500,000$500,000

SFR for SFR for $0$0 down down

and make and make $638.$638.4545/mo/mo

38 BTi, Inc. © 2008

Wraparound MortgageWraparound Mortgage Breakdown: How to wrap itBreakdown: How to wrap it

purchased 2004 (existing financing) $25,000 down, $525,000 1st$25,000 down, $525,000 1st 30 years @ 5%, $2,818.30 years @ 5%, $2,818.3131/month/month 27 years and ~$500,000 27 years and ~$500,000 remaining remaining

$550,000

purchase now ‘subject to existing’ current property value = current property value = $500,000 $500,000

$0

sell on a ‘wraparound mortgage’ 40 years at 8%, $3,456.40 years at 8%, $3,456.7676/month /month

$500,000

collect your cash!collect your cash! $3,456.76 - $2,818.31

(AITD income - existing note payment)(AITD income - existing note payment)

$638.$638.4545/mo/mo

39 BTi, Inc. © 2008

Wraparound MortgageWraparound Mortgage Breakdown: How to wrap itBreakdown: How to wrap it

purchased 2004 (existing financing) $25,000 down, $525,000 1st$25,000 down, $525,000 1st 30 years @ 5%, $2,818.30 years @ 5%, $2,818.3131/month/month 27 years and ~$500,000 27 years and ~$500,000 remaining remaining

$550,000

purchase now ‘subject to existing’ current property value = current property value = $500,000 $500,000

$0

sell on a ‘wraparound mortgage’ 40 years at 8%, $3,456.40 years at 8%, $3,456.7676/month /month

$500,000

collect your cash!collect your cash! $3,456.76 - $2,818.31

(AITD income - existing note payment)(AITD income - existing note payment)

$638.$638.4545/mo/mo

$2,818.$2,818.3131

$3,456.$3,456.7676

AITD = AITD = All Inclusive Trust DeedAll Inclusive Trust Deed

$3,456.$3,456.7676 - $2,818. - $2,818.3131 = net cash flow= net cash flow$638.$638.4545/mo/mo

40 BTi, Inc. © 2008


One more thing… One more thing…

Any principal paydownon the wrap

is…

Any principal paydownAny principal paydownon the wrapon the wrap

is…is…

TAX FREE!!TAX FREE!!

41 BTi, Inc. © 2008


OK, one last thing…OK, one last thing…(really!)(really!)

After 27 years of payments, the 1st is paid off.After 27 years of payments, the 1st is paid off.YouYou get the entire get the entire $3456.$3456.7676/month/month yourself! yourself!

Remaining AITD balanceRemaining AITD balance (now in 1st position)(now in 1st position) is is

$336,524$336,524If the buyer now refinances the propertyIf the buyer now refinances the property

and pays you off, you get the entire…and pays you off, you get the entire…

$336,524$336,524

42 BTi, Inc. © 2008


OK, one last thing…OK, one last thing…(really!)(really!)

After 27 years of payments, the 1st is paid off.After 27 years of payments, the 1st is paid off.YouYou get the entire get the entire $3456.$3456.7676/month/month yourself! yourself!

Remaining AITD balanceRemaining AITD balance (now in 1st position)(now in 1st position) is is

$336,524$336,524If the buyer now refinances the propertyIf the buyer now refinances the property

and pays you off, you get the entire…and pays you off, you get the entire…

$336,524$336,524 tax free!tax free!

43 BTi, Inc. © 2008

Review: 3 WaysReview: 3 Ways[To Profit!]

[To Profit!]



Wraparound Mortgage Wraparound Mortgage (AITD or ‘All Inclusive Trust Deed’)(AITD or ‘All Inclusive Trust Deed’)

Thanks For Joining Us

—•—

Any

Questions?

Thanks For Joining Us

—•—

Any

Questions?

45 BTi, Inc. © 2008

Contact MeContact Me





Economy & Finance

Creative Financing For Buyers & Sellers