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How do you determine if a 100% owner financed deal makes sense?
This video will show you what to look for and what to avoid.
Owner financing almost always makes more sense than using your money or your credit, but not all owner financed deals are created equal.
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Read the Transcript:
Here’s an example deal where I’ll show you how to structure it and still come out ahead, using either Subject To or a land contract.
“I have a deal that has some good features to it but I’m broke and have bad credit. I need this deal to get some cash flow coming in and start replacing my income and allow my wife to be home with the kids. I’ve located a grouping of duplexes that the seller is willing to sell with 100% owner financing for 9,000 for each building. They’re rented and in good shape. I contacted a local realtor that I found on Craigslist and she drove by and said that they looked good and that his rents are normal. If I can get my own financing, he’ll give me a 20% discount for not having to carry the note. I cannot go to traditional lenders because my FICO is 596.” — C.R. Harpe, Florida
Joe: These days, if you want to get an investment loan, you’re going to need a 720 and show income to support those properties even without their rent. It’s very difficult to get an investment loan these days.
“I found a private lender but most won’t touch anything under ,000,000. The only one that I found that will handle smaller acquisitions will do 65% loan to value on the appraisals or purchase price, whichever is lower.”
Joe: This is hard money he’s talking about here. I would stay away from hard money, unless you know for sure that you have a buyer and that you’ll be able to get out of that deal quickly. Hard money — I can’t say hard money is never profitable — I’ve used it and I’ve made a profit from it, but it eats into your profits so much. There are so many other ways to finance a deal than using hard money.
Joe: This is one thing that I should reiterate — you don’t need cash to buy properties if you find the right properties and go after the right types of deals. What so many of you are doing are looking at properties that are not going to be available that way. This one looks like it might be possible to do it on terms without cash or hard money because the guy said he would finance it 100%. So let me finish the letter here.
“The county has the building assessed at 1,000. For the three that I would like to buy, the total comes to 3,000, so I would need to get 5,000 to the seller. That’s not quite the 65% loan purchase price.”
Joe: He’s talking about the 65% loan to value that he could use for hard money — don’t do it that way. First of all, if you try to show that you’re paying a certain price for a property, and if you’re trying to show that you’re paying more for it than you are, and then getting the down payment funneled back to you through the seller, that’s loan fraud. You’ll get yourself in trouble; you’ll get yourself put in jail — so don’t do that.
Joe: Make sure the lender understands exactly what you’re doing and that all of it is revealed. We’ve done some very creative stuff in the past with rebates and things like that, and all of that’s legitimate as long as the lender’s aware of it and accepts it. I’m not just talking about the loan broker being aware of it but also that it’s in the loan documents and it’s obvious that that’s what’s happening.
Joe: The broker and the actual lender are two different entities, and in a lot of cases, the broker will just tell you, ‘Just do this this way and that way and the lender will accept it.’ When in fact, what he’s saying is that that way the lender won’t know….
To read the rest of the transcript and more of Joe Crump’s articles, click here: http://joecrumpblog.com/example-deals-100-owner-financed-deal-in-florida-analyzed-does-it-make-sense-2/?utm_source=Youtube&utm_medium=EndLink+&utm_campaign=Youtube130722
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http://PushButtonAutomarketer.com – This video will teach you how to use software to automate 90% of your real estate investing tasks. Just turning it on will bring in a steady stream of Motivated Sellers who will finance your deals and allow you to buy with no money down and no credit check.
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