BUMPED EQUITY – ‘NOT UNLIKE A SAVINGS ACCOUNT INTO WHICH YOU PUT NOTHING: BUT OUT OF WHICH YOU PULL THOUSANDS OF EXTRA DOLLARS IN A COUPLE YEARS

Let’s say you find a property that is worth perhaps $90,000 to $100,000.

You learn that you can have it for an MAV (Mutually Agreed Value) of $80,000 by making it a fast deal and just taking over the monthly payment obligation.

Let’s also say that the property needs, say, $4,500 or so to cover unpaid arrearages (‘assuming the lender won’t consider forbearance).

In order to make a future profit, ‘you now bump the equity (i.e., increase the current MAV (mutually-agreed value) for your Resident Beneficiary to, say, $105,000 and charge him/her, say, 6.0% to get in (about $6,500). You have now made $25,000 on paper and $2,000 in cash up front, plus a positive cash-flow along the way (‘i.e., ‘in addition to the principal reduction and future appreciation you’ll see over the term of the agreement.

You’re doing great!  Nuthin’ ain’t cost you nuthin’ so far!  But in this case, Nuthin is indeed worth Sumthin!  (‘With apologies to Janis Joplin and Bobby Mc Ghee)

Next, you make your verbal offer to the seller at $80,000, and explain that you are an investor and need to make a reasonable profit (maybe). You explain that since you will have to negotiate with you incoming Resident Beneficiary, with his/her permission you’ll need to put a larger than actual MAV on the offer: ‘i.e., in order to have plenty of negotiating room (‘as is virtually always needed).

Then, ‘when presenting the offer to the Settlor (seller), you show his actual refundable contribution as zero, but show yours as the difference between the acquisition amount (80,000) and the bumped MAV of $105,000. This doesn’t affect him negatively in any way, and could even lessen any tax burden he might have ‘if he will have Capital Gains to deal with (‘upon the trust’s termination).

Now, ‘when you decide to meet with your Resident Beneficiary prospect, he/she sees the higher amount and doesn’t worry about the difference, ‘as he/she will presume that you put in $25,000 in cash (‘unless you tell them otherwise).

The documentation will now show that at the end of the agreement’s term, you and your Resident Beneficiary will sell or refi and give the Settlor (your seller) his equity refund (‘which is zero in this case…‘unless there were to have been some equity for him at start).

At the trust’s termination (‘and that of the lease), you give yourself your $25,000, and return the Resident Beneficiary’s initial non-recurring closing costs (‘i.e., any closing costs that were a one-time expense); ‘following which you and your Resident Beneficiary split the remaining net proceeds relative to your respective percentages of beneficiary interest having been held in the trust: i.e., ‘depending on whether or not the requisite 10% beneficiary interest held by the Settlor during the trust’s term will be relinquished to you or not…’according to your initial agreement with the Settlor.

In certain cases you might have agreed (‘perhaps for added incentive) that the Settlor should participation in profit-sharing at termination ‘proportionately with his percentage of beneficiary interest held (‘although more often than not, the Settlor’s percentage is set to be fully relinquished  at termination in consideration of prompt payments and strict adherence to contract terms throughout the transaction).

Question: So why should the settlor have any beneficiary at all during the transaction’s term?

Answer: 1) So that there is no violation of any underlying lender’s Due-on-Sale Clause (12USC1701j-3); 2) so that the Settlor can have an insurance interest in order to acquire and retain Landlord Insurance Coverage (the tenant beneficiary obtains his/her own renter’s policy); 3) and so that the Non-Resident Beneficiary  will have access to the right of Depreciation for tax benefits (i.e., “Use it or lose it,”  ‘as they say ‘in reference to the IRS’ recapture upon sale, i.e., whether it has been claimed or not).

Remember that bumping the Mutually Agreed Value in this manner by, say, five or ten thousand dollars today doesn’t make the property any more valuable (today), or earn you any more money (‘today): ‘but it does give you significantly more profit at the end of the EHTransfer™, when the trust is terminated and the property is sold or refinanced, and net proceeds are distributed.

Question:  Why would anyone agree to take on the property at more than it appraised value?

Answer: Because they are acquiring a home of their own without needing new bank loan, ‘without standard credit checking; without a normal down payment; and because you don’t care about their credit as much, ‘as long as you have a couple (2 or 3) refundable payments held in the trust’s Contingency Fund for use in case of default and the necessity for eviction.  Inasmuch as, due to the trust, they can never claim having an equitable interest in the property (i.e., the trustee holds all of that), a foreclosure process is never necessary…’just simple, unfettered eviction pursuant to the agreement in the ancillary Triple-Net Lease.

Remember too that the posted Contingency Fund is for the purpose of making any missing mortgage payment; and no matter how much money may be in the fund, a default in payments will result in eviction and termination of the trust (‘if not cured within the allotted time).

Note as well, that irrespective of any amount in the Contingency Fund: ‘in the event of a default, it will likely be yours to keep, in so much as the tenant-buyer will still owe the missing payment/s and all remaining payments on their lease: ‘as well, they also owe any requisite refurbishment and re-marketing expenses.  And also, for any amount still outstanding, they are subject to lawsuit and obligated to pay you, voluntarily nor not, what you are owed ‘should they come into money within the next eight to ten years (‘and depending upon where you live, your lien against them is renewable after that time period).  Note that the defaulting party’s incentive to pay you what you are owed is intensified when they realize that your lien can prevent them from getting credit for buying a house or car, ‘or maybe even getting (or keeping) certain jobs.

-0-

Another way to bump (or “pump”) a property’s MAV is to make your offer at the $80,000 amount, then get the offer accepted in writing: ‘then go back to the Settlor and suggest that for your benefit, the $80,000 be crossed-out and initialed, and replaced with a higher number in order to give you some negotiating room with your incoming Resident Co-Beneficiary (‘you point out that doing so will raise your beginning contribution without affecting his income his tax basis (‘could be a good thing if he has equity).

You then say: “Let’s make it, ‘Oh, say, $105,000; ‘and although I probably won’t get anything close to that, ‘it gives me some room for negotiation.”  Again…you now have the higher MAV showing in the documents and needn’t hide anything from the resident (or the Settlor).

When your Offer to Acquire is accepted by signature of the Settlor, that’s also a good time to have him/her execute the limited Power of Attorney, so that you don’t have to go back to him for signatures later.

That’s it…’ain’t no big deal!  Just keep on bumpin’!

BUILDING A BIRCH-BARK CANOE OUT OF SARAN WRAP AND BANANA PEELS OR…”WE MAY BE EXPENSIVE, BUT WE ARE VERY SLOW”

For interest’s sake, the following is a recent letter to network members who suggested that he might want to reconsider using the NEHTrust or PACTrust because it takes longer to facilitate and close than does a L/O or Wrap. Well…being the thin-skinned meek little (sweet) jelly muffin I am, I suggested that if he didn’t want it done right, I couldn’t help him; but that if he did want it done right it would take more time than most other creative financing schemes (L/O/s CFD’s, Wraps, Equity Shares, etc.).

Our motto around here is: You can pick any two (but only two) from the list below, and we’ll be your Huckleberry…

1. Have it Done Properly
2. Have it Done Quickly
3. Have it Done Cheaply

So…after it was suggested that we shouldn’t take such criticisms so personally, I responded with the following:

Yup…I do take personally anything that has to do with the safety and well being of your business and/or mine. My business is ME, and my products and services are 100% ME: and [product or service comprises my very alter ego to the nth degree (to the bone, as it were). And, hey, that’s not a bad thing though, because that quality within me is what keeps me and all my students and clients out of court and out of jail.

As well (I continued), I do understand your frustration Elmo, (“Elmo T. Flopenenwaller”) and I am willing to work through it with you with any constructive suggestions you might have for improvement: but in the meantime, you MUST understand that certain processes simply may not be avoided or compromised. If we allowed that, we could not hold ourselves responsible for these transactions and keep you and your clients out of serious trouble later on down the line.

The entire process comprising the Third Party Co-Beneficiary Transaction (PACTrust™ or NEHTrust™) is as follows (I have given reasonable time spreads for the number of workdays that might be (could be) involved in each of the steps or phases which comprise the documentation process…variations in mailing and shipping times and weekends and intervening holidays notwithstanding:

1. Fist, your clock starts ticking (though ours doesn’t yet) when you meet with you client and get their acceptance of your proposal – 1 – 2 DAYS
2. Next you obtain all the appropriate information and send it to us (or have us obtain it for you). 1,2 3 OR MORE DAYS has usually gone by since your original contact) – 1 DAY
3. Next, you compile and forward us Appendices 1 through 5 completed (if not completed accurately or fully, add another day or two for us to round-up all the information we need for data input) – 1-2 DAYS
4. Our data input and document formatting is completed (3 or more hours of work), whereupon the initial land trust is created and sent to legal for review and to PAC or Equity Holdings for holding once the signed original is received following COE) – this serves as notice to collections and the trustee that the transaction is in process and entering Escrow within the next 1-2 days, and for them to get their procedures in line to receive the new project when Escrow closes – 1-2 DAYS FOR INPUT AND FORWARDING
5. A Verification of Data (VOD) report is then sent to you (the investor) for review. At this point nothing is sent to the parties until you have personally approved and verified that the figures are accurate and that no information is being given to anyone that shouldn’t see or have it (e.g., your acquisition price, mo payments, initial work-out arrangements, etc.). We then have to wait up to 48 hours for a return or acceptance of the VOD: though we will proceed without you if we haven’t heard from you in 48 hours – 2-3 DAYS
6. When your VOD has been signed and returned to our office, or when your 48 hours are up, we then draw First Drafts. At that point if no corrections are necessary (‘happens VERY rarely), then the first drafts are individually forwarded to all parties (by regular or overnight mail, unless we are instructed differently): Allow for 2 days to delivery and 2 days for return or verification – 4-5 DAYS
7. When all drafts have been returned with corrections or acknowledged to be OK as is (happens rarely), we then either — 1) complete and forward 2nd drafts (if corrections were made) – 2-3 DAYS; or 2) proceed to final documentation (if no corrections were required) – 1-2 DAYS. All final documents are forwarded (by overnight mails or PDF computer file) to Escrow – 1-2 DAYS
8. Any additional verbiage in the Rider Agreement or in related documents (other than boilerplate) must be run though our legal department (outside law firm) for review and approval – 1-3 days (depending upon attorney’s case load)
9. Following legal review, documents are forwarded to Escrow, who then prepares the Settlement Statements and any other necessary documents simultaneously with their Escrow Instructions for shipping. 2 DAYS
10. At this point Escrow either arranges for a sit-down closing in the client’s area, or (if preferred) documents are sent Over Night for execution in counter-part for return to Escrow for final review and approval of completeness. The documents have then to be signed notarized and returned to Escrow by the US Mail, Fed Ex or UPS – WHOLE PROCESS CAN TAKE 6-7 DAYS
11. When everything is back in Escrow’s hands–if no mistakes have been made—the final title search is run and the deed is sent by messenger for recording in the local area (US Mail, Fed Ex or UPS): all monies are then distributed (checks cut) to the appropriate parties and the Escrow is closed – 1-4 DAYS (depending upon time-of-day materials are received and/or mailed out by Escrow)
12. Upon their receipt by Escrow, all original signed documents are reviewed for correctness and forwarded (Overnight Mails) to PAC or Equity Holdings and to NARS for final set-up of the Holding and Collections files. PAC then sends a Welcome Letter and remittance instructions…and voila, the transaction is finalized – (ANOTHER 1 – 2 days).

Now, Understand CLEARLY that IF at any point along the way a mistake is made and not caught soon enough, it may become necessary to redraft certain documents (e.g., if the MAV were not stated correctly in the beginning, or if payments were not calculated properly, or if a key profit center wasn’t clearly defined in the beginning…or new Rider information were to requested, etc.)

Ways to shorten the processing time or your transaction:

1. Make sure all “I’s” are crossed and all “T’s” are dotted on the original worksheets (Appendices #1 thru #5) when you send them to us
2. Verify and clear all anticipated charges through NARS (Appendix 4) first, before sending in the worksheets (Appendices #1 thru #5).
3. Assure that all start-up moneys (Retainer Fee and Good Faith Escrow Deposit) accompany your order for documentation; and assure that the Retainer Fee Agreement is properly signed and dated when we receive your package. We can not start without a signed and paid Retainer Fee Agreement
4. Provide NARS with a good and valid Legal Description of the property along with your order for documentation and facilitation (full Lot, Tract, Map Book, Page, Plat, Parcel, Assessor’s I.D. Number, etc.) at start. If we have to order it, it can add 2-3 or more days onto the turn-around time.
5. Volunteer to handle the walk-in and recording of the transfer document (deed) yourself once it has been signed and notarized by the transferor (state that you will do that in a note with your documentation order)
6. Handle all mailings by overnight or express mail
7. Be prompt in reviewing and returning VOD’s, drafts, corrections, changes or amendments by Fax. And, above all, be explicit enough in your notation (re. variations from standard documentation) that you do not have to be contacted for clarification
8. Be as brief as possible, but complete (i.e., be succinct) in all written (faxed or Emailed) correspondence.
9. Volunteer to handle the final signing of documents yourself in your office (must have a Notary standing by) so that clients can’t dawdle and procrastinate.
10. Never be mean to anyone in the NARS documentation department (but do not send candy or flowers alone…cold hard cash and booze bribes seem to work best).

A tough question posed recently by a would-be investor in the East: 

“Where I live there hasn’t been any appreciation in real estate for several years now. If I truly want to pursue being a real estate investor, should I move elsewhere, or wait for the market to turn?

To some this might seem a reasonable question; however, my response was: “Stay put! Empowering such bogus rationale is what keeps the millionaire ranks as low in number as they are.”

The key to creative real estate investing is to have a plan that adapts quickly to ANY market…it doesn’t matter which direction market dynamics flow, the force is still there: water flows east with the same strength as when it runs west. In a “down” market, there are few willing buyers; but obtainable properties abound, and they’re all for sale at the best prices.

In an “Up” market there may be fewer “easily” obtainable properties: but there are more buyers, and they’ll do just about anything you want them to in order to get in on the action.

The fact is that market dynamics in creative real estate have always required “thinking outside the box.” The true creative entrepreneur lives with, copes with, and makes his/her living with…’that fact always in mind.

Think about it…a fisherman who goes fishing armed only with catfish bait, most probably won’t catch trout. All he can expect to bring home is catfish…’if they’re biting that day. If the catfish aren’t hungry, the fisherman will be.

On the other hand, the serious and well-studied angler, carries a “full” tackle box, so that when the catfish aren’t biting, he can hook up for trout, bass, walleye…or a sperm whale, if he wants to…’at a moment’s notice.

Understand that when real estate appreciation trends are up, a seller’s market prevails: sellers set high prices and hang in there till they get them. On the other hand, when appreciation is down or stagnant, that’s a buyer’s market: fewer of those kinds of properties may be available, and their sales are sparse.  It’s during these downtimes that most folks are counting pennies and digging in for a long winter, rather than looking for a new home.

In other words, a seller’s market pushes prices and circumstances toward the seller’s benefit; whereas a buyer’s market pulls everything down to suit more buyers’ needs.  But none of this should be a concern of the well-studied CRE investor. In an up market you sell, in a down market you buy and hold.

During our last major downturn, a common cry was: “Help!  Houses are a dime a dozen, but I can’t find any buyers.” But now that the market has turned, the current entreaty is, “Help! Buyers are everywhere, but I can’t find any houses!” And (for the most part) who do you suppose these two disparate plaintive moans are coming from?

Right! Exactly the same people: ‘those who choose to blame their own shortcomings on market condition, having failed to plan to “bend with the trend (as it were).”

To excel in any market, we need education…and dependable tools that work in all circumstances. In a seller’s market, we must be able to attract and serve buyers who would love to climb on the home-buying bandwagon, but who haven’t yet saved up the cash or garnered the credit to do so. In a buyer’s market, that knowledge and those same tools must attract sellers of no, low, or negative equity properties; fixer-uppers; distress sales; NOD filings; and “hard-to-moves”…while simultaneously wedging us, the creative investor, into the middle.
This is where Equity Holding Corp’s Equity Holding Trust Transfer™ comes in.

The Equity Holding Trust Transfer™  is, in essence, a third-party title-holding (land) trust system (“on steroids”) , which works virtual wonders for investors, buyers and sellers in any market.

With this remarkable tool, the existing mortgage stays in place—without a due-on-sale compromise; as full income tax write-off is transferred to the tenant-buyer  (‘i.e., in exchange for higher payments than rent can provide a landlord; but significantly lower payments for the tenant-buyer (due to the many ownership benefits including full income tax deductions for mortgage interest and property tax, as well as profit sharing).

By virtue of the anonymity of ownership, the Transfer™ property is well shielded from creditor judgements, tax liens, lawsuits, bankruptcy action and marital disputes. Think of it:  No down payment; No bank qualifying; No payments; No expenses; No recourse; No eviction (dispossession) problems; and No tenants, toilets, trash and trouble.

THIS is creative real estate investing!

Imagine telling a seller who may be reticent about “carrying,” that he needn’t transfer the title to you until you opt to sell or refinance in the future. Or that he needn’t worry about liens, suits, judgements or personal problems ever compromising the property’s title… while he remains on the loan (‘nor do you need to worry about such occurrences on his behalf).

The Equity Holding Trust Transfer™ gives your tenant full tax write-off in exchange for paying (your) full mortgage payment, property tax and insurance (and HOA?). For a share in future appreciation potential, they’ll gladly pay 100% of the (your) maintenance, repair and management costs. In other words: “Mr. Buyer, if you can afford the payments (which include a few hundred in positive cash-flow for me) and a few thousand dollars in closing costs (most of which goes into my fuzzy little pocket)… I’ll give you the property.  The only thing I want out of it is to have you refinance it in yur own name, or sell it, in a few years, and at that time, ‘if there’s been any appreciation, we can just split it.”  In the meantime you have 100% of the house, 100% of the tax write and 100% of all fee-simple real estate ownership benefits…’ and of course…’full pride of ownership.

LET’S GET SERIOUS ABOUT THIS BUSINESS OF OURS!

NO ONE NEEDS PILES OF CASH OR GREAT CREDIT
IN ORDER TO MAKE A LOT OF MONEY IN
“CREATIVE” REAL ESTATE INVESTING!

Can you acquire investment real estate and get wealthy, despite starting off with ‘No Credit,’ ‘Marginal Credit’ or even ‘Bad’ Credit?  ‘And how about making money in this business when your perceived short-comings include — ‘having no cash either?

Wait! Let’s make it even worse.  Let’s presume you’re sans (i.e., without) cash and credit, but you also have no experience, no professional contacts…’and you’re ugly.

[Were any of these factors really to matter, regarding success in this business, ‘especially that last one-I’d still be slopping pigs and plucking chickens for a living (…’not meaning to disparage any chicken-pluckers or pig slop slingers out there, by the way; ‘but I do find accumulating and counting money and real estate titles is a far more rewarding enterprise)..

Regarding the first question (i.e., “Can you…”), the answer is a resounding “YES”! But that’s true only if you have lots of other stuff too, ‘such as a self-starting ability, determination, sincerity, maturity and at least a modicum of salesability… and–above all– ‘a Burning Desire to Achieve!

Do you need every one of these qualities in order to be financially successful?  No! But if you are missing any one of them, your maximal chance of success is reduced proportionately with each missing element…’with special attention to the “Burning Desire” part.

With no disrespect for those who have sacrificed, scrimped, and saved to maintain perfect credit, I’d like to say that I couldn’t adequately express the respect (‘and no small degree of jealousy) that I have for you and your achievement. Personally, however, I have never been blessed with a lot of money and good credit at the same time.

Throughout the many phases of my own personal development (‘beginning somewhere around the Cenozoic Epoch), I’ve had both…’just never simultaneously.

Nevertheless, even without an abundance of cash and/or credit at any one time, I’ve managed to accumulate several million dollars’ worth real estate at various times over the years; ‘with almost none of it acquired with, or because of, credit (or cash).

And although, to some extent, the cash and credit parts of life-in general have improved a bit for me, I still prefer to acquire property silently and secretly without a cent out of my own pocket, and without a new mortgage loan or monthly payments.

Real estate is virtually free for me, given the way I do it, ‘in as much as my resident-beneficiary tenant-partners make the payments, handle all repairs and upkeep, and cover any upfront fees when I put them in the properties).

For anyone whose credit has been damaged: ‘know for sure that reestablishing it is a prudent thing to do; however, don’t forget that one’s not “using” their credit (the American Stoic approach) is far worse than one’s not having it.  Although, millions of us do just fine without it for long stretches of time…because we can get it.

Here’s my logic: If people with great credit don’t use it, and get rich anyway, ‘why would someone else without any need to worry about not having it?

And that’s where I come in.  In my own case, I filed a business BK in 1989, and gave away, and spent, everything I had ever owned in my life (‘everything!) in order to pay off my creditors. It took a while, but I did it, and I didn’t suffer much in the process, because within a month of having gone through the ordeal, I acquired a beautiful $520,000 home without a penny out of my pocket and without any need for credit. I even gave the seller (‘Mr. and Mrs. Gil Burrell of Granada Hills, California) my full credit report along with all the information leading up to my bankruptcy.

I got the property based solely upon my pleasant demeanor, decent “selling skills” and my plausible explanation for the BK and bad credit. Because of the sincerity I portrayed along with my offer to provide my plan for correcting the problems (and the “expensive looking” suit that I was wearing), the idea of credit per se became a non-issue for getting that property…’and another fifty more over the next couple years.

After that period in our lives, unfortunately the Burrell house was shaken apart by the 1994 Northridge Earthquake, reducing its value overnight by $300,000, leaving an over-encumbrance of $200,000 plus: ‘at which time I just walked-away; ‘and by the same techniques, acquired another home  a mile or two distant, and carried-on with our business (i.e., ‘no down, no credit, no new mortgage real estate acquisition), whereby my resident co-beneficiaries in the trusts that held titles to those properties, paid all the bills and handled all maintenance and general expenses for me (‘payments, taxes, insurance, HOA dues and a reasonable positive cash-flow to me)…’in exchange for use, occupancy, full tax-deductions, loan principal reduction, hoped-for appreciation and Pride of Ownership.  [Neither I nor they were on title, or on the loans, but with the EHTrust™ transfer system that we teach, that doesn’t matter.]

So…’about the time I began to feel secure, successful and cocky again re. my exquisite home-buying skills, and making better than average money by teaching hundreds of others how to do what I knew how to do so well, ‘the 2007 Subprime Crisis swooped in, hit hard and gained momentum clear up to, and well-beyond, 2010 (‘and is still haunting hundreds of thousands of the “totally screwed” throughout the country today.

In 2007 and the early part of 2008, I was fortunate enough to see the proverbial “writing on the wall,” and successfully sold-off several of our properties…the one’s with real equity in them (‘in which I had pure profit due to having no real money invested in them).

However, as is the often the case …‘When the Student is ready…the Teacher…’swoops down from out of the sky and beats the living crap out of the poor student…’in order to cure him of his hubris and wholly unearned cockiness.

Overall, in the melee I lost 53 properties due to the crisis, and managed to use up the profit I’d gotten from my earlier sales in attempting to salvage the rest…’all to no avail, while the economy continued on its path from “really bad” to atomically super-shitty (‘pardon the expression…’it’s an ancient Druid term derived from an amalgam of the ancient Druid words – “Shingle,” and the abbreviation for “Teletype”: I.e.: Shi[ngle]+TTY).

Since that time, we’ve survived, and we do reasonably well in having silently acquired a modest number of other properties by precisely the same methods…’i.e., ‘wholly without credit or cash, but with being more picky about our tenants and how much up front cash they come in with.  We now make sure they don’t have bullet holes in their cars, and that their pants are not lowered below their buttoxes ‘so as to display their gang colors on their drawers or any “vertical hemispheric demarcation (‘as it were).”

I wouldn’t say we’ve recovered completely…yet, ‘but we’re getting there, and we do eat pretty regularly, and are reasonably well-protected from the elements (wind and rain) ‘as long as the next storm doesn’t blow the canvass off our makeshift tent poles. (‘No…’actually we have a very nice home in Henderson Nevada and thank God for giving us the prime-rate crisis as a reason for permanently putting California in our rear view mirror (‘no offense to Californians…’its just that your taxes are too high and your politicians are too crooked…’and all of them are certifiably goofy).

Without ANY apparent “credit worthiness” we’ve managed to acquire credit cards (secured and unsecured), and to finance several nice automobiles. ‘Over the years, I must say, that we just haven’t suffered much, even in view of losing 53 properties and a couple million in equity: due largely to having very little invested: ‘as the properties were all acquired without down payments, without new mortgages; and our resident beneficiaries paid all the bills (‘i.e., until they couldn’t do so any more… ‘at which time the properties went back to their original owners, for their decision as to whether they wanted them back, or preferred to let them go to foreclosure (‘virtually all went the foreclosure route, but there were no loans in my name and I was not on single title…’my corporate trustee was and was beyond all responsibility and recourse).

The upside of it all is…’well…’what all losers say when they finally get back on their feet after a losing streak:  “Aha!  Now I know what to do the next time this happens (‘although, providence will probably figure out another prank with which to punch me in the gut until I get the point).”

And that point is a simple one: The prudent person should do everything in his or her power to get their credit in order; but in the meantime, ‘never let the absence of credit negatively interfere with, or affect, their investment pursuits.  One simply does not need cash OR credit in order to be a successful real estate entrepreneur… ‘assuming a good grasp of their intentions, and a good escape plan, when starting…’and assuming you have a solid source of information, education, know-how, mentoring and coaching, and a source for sound and dependable advice and encouragement.

Following–‘in the order of their overall importance–are the tools you need in the No Down, No New Loan, real estate investing business:

1.  An honest dissatisfaction with the status quo
2.  A burning desire to achieve
3. An honest NEED for increased abundance. I.e., ‘if you DON’T NEED it…’you won’t get it!  ‘Without needing (‘having a burning desire for it) you only have wishing, hoping and dreaming to depend on, ‘which are each on par with horse-racing and crap-shooting as far as attaining is concerned).
4. Tenacity: I.e., ‘the undaunted ability to stick-to-it, no matter what!
5. Resiliency: I.e., the ability to shrug off a failure (‘or several of them in a row) and move on with undiminished zeal
6. Selling skills: Learned and/or natural sales-ability (‘i.e., the ability to listen and think at the same time; always listening more than talking; remaining 100% honest and forthright while staying unattached to the outcome)
7. A professional and business-like demeanor re. your personal grooming and attire. E.g., a misplaced body-piercing or ornamentation can cost you millions in lost opportunities in just a few years…’without your ever even knowing that it happened, ‘much less Why
8. A solid understanding of Real Estate and Real Estate Finance
9. A source of available cash…or someone to call-upon who has it… or a way to avoid its necessity
10. A real comfort in product knowledge, allowing one to “go commando” in this business.)   *Comando: No cash, no credit, No experience and perhaps Limited sobriety

In this business, without at least the first five elements in the above list, you are likely destined for failure (‘in this business).  However, with #1 through #5, ‘along with any one of #6 through #10, your chances of success are good.

With all of, say, 9 out of 10, your success is unavoidable, and abundance is already yours, and just patiently waiting for you to reach for it and demand it into you life.

The best advice anyone will ever give you: ‘Find that Self-Serving Need in your life that is feeding upon your financial deficiency and destiny…’and eliminate it ‘once and for all.  Know that anything pleasurable that you decide you can live without will always (invariably) be immediately replaced by something else that is better for you and you life’s aspirations.

DUE-ON-SALE CLAUSE: The clause (Para. #17) in virtually all mortgage loans, that permits a secured mortgage lender (federal, state or private) to call the entire unpaid loan balance Due and Payable immediately should the property securing the loan be sold, transferred, traded, gifted or otherwise disposed of without the lender’s prior written consent (‘and without the borrower’s giving them the opportunity to charge more money or say “No” to the transfer).

Despite the due-on-sale clause and its implications in the creative real estate financing business, it is quite possible for one to take over the payment stream on a non-assumable mortgage loan without needing to fear, or even to be concerned with, a DOSC Violation…’and without violating it.

In order to effect such a take-over without there being an unauthorized transfer, one need simply assure that the property is, in-fact, NOT being sold, traded, hypothe-cated or transferred in any ‘unauthorized’  manner (‘i.e., one’s placing his/her own real estate into his/her own inter vivos trust is not considered an unauthorized transfer as per Title 12 of the US Code §1701j-3)).

In this regard, since placement of real estate in the borrower’s revocable living trust for “asset protection” purposes is fully allowable under the law (ibid); and since appointment of a co-beneficiary as Remainder Agent is a prudent thing to do when creating any kind of inter vivos trust: a would-be “seller (“owner of record”) need merely vest its real estate in bona fide corporate trustee for such a trust, and thereupon deal with the ownership interest in the trust, ‘rather than dealing with the title ownership in the property.

At this point, the buyer (‘i.e., ‘of beneficiary interest: versus interest in real estate) gains virtually 100% of the same incidents and benefits of Fee-Simple Real Estate ownership that any traditional buyer might in a traditional transfer of the property’s title, i.e.: income tax deduction for mortgage interest and property tax, use, occupancy, quiet enjoyment, littoral and riparian water rights, salability, and the right to ‘quiet enjoyment.”

The only caveat here is that the “living (inter vivos)” trust being utilized for this purpose must be an “Illinois-type,” title-holding [Land] Trust, and be fully revocable and be an inter-vivos trust (‘i.e., ‘in effect during one’s lifetime).   However, the land trust is, by its nature, wholly directed by its beneficiaries and ‘not by its trustee, as is the case with other inter vivos trust structure (‘such as, say, a “fully funded inter vivos family trust).  As well, ‘in the land trust, the legal title to the corpus (‘the property) as well as all “equitable” title, is vested in the trustee, who becomes the true (‘albeit, temporary) owner of the real estate during the trust’s stipulated term of agreement.

As a result of of the total vesting of title in the trustee, the beneficiaries themselves, hold only a personal property interest in the trust, versus owning real estate per sé; however, in this type of trust, the beneficiaries are none-the-less treated as property owners for income tax purposes (IRR §92-105).

The term of the trust is decided-upon by mutual-agreement of the beneficiaries, and can last up to 21 years beyond the “life-in-being” of any primary beneficiary (i.e., this rule is to prevent a Contract in Perpetuity).

The rule against perpetuity is often stated as follows: “No interest is good unless it unconditionally must vest, if at all, not later than twenty-one years after the death of some life in being at the creation of the interest.”

*When a part of a grant or will violates the Rule against Perpetuity, only that portion of the grant or devise is removed. All other parts that do not violate the rule are still valid. The perpetuities period under the common law rule is not a fixed term of years. By its terms, the rule limits the term of the contract to no more than 21 years following the death of the last identifiable individual living at the time the interest was created (i.e., the “life in being”).

Such terms generally run for from 1 to 20 years, with the understanding that, at the end of that time, the trust will be terminated and the seller’s interest (as little as 10%) will be forfeited to the co-beneficiary (buyer).  Such forfeiture merely needs to be in consideration of some future act by the buyer (e.g., prompt payments; strict adher-ence to contract terms; a share in appreciation or overall profit; etc.).

Often times, however, beneficiaries might mutually agree to share profits at
termination in proportion to their respective beneficiary interests (50:50, 90:10; 75:25, etc.).  n tis regard, it is most important understand here that the verbiage of a lender’s Due-on-Sale clause doesn’t always convey exactly what we or our attorneys THINK it does, or what the lender expects us to believe it does ( little trickery here)…irrespective of whether a lender’s exercising its rights under a DOS clause are “real,” “false” or indifferent.

What the DOS does infer is: “UNLESS PROHIBITED BY APPLICABLE LAW…” the lender has a right to foreclose, if the title to its security is transferred into a trust, and if a beneficiary interest in that trust is sold or transferred.”
Well…make no mistakes about it! Such action ‘IS’ indeed prohibited by “applicable law.” The Law (The Federal Depository Institutions Regulations Act of 1982) strictly prohibits ANY lender from taking exception to a borrower’s placing its property into its own inter-vivos (living) trust (such as a Title-Holding Land Trust), and appointing a 2nd party to function as a remainder agent co-beneficiary.  Tjs is so because the directors of this type of trust are the beneficiaries, ‘not the trustee.  Ergo, the person to take over in the event of the demise of the director would be another beneficiary: not another trustee.

Further, there is nothing to prevent the same co-beneficiaries from leasing the property out to any one they may choose…’say, to the trust’s 2nd co-beneficiary, for example.

Overall, the process described here creates what is tantamount to a legally constructed, and very safe and well-shielded ‘Wrap-Around Seller-Carry’ device.

Since the original owner of the property has named the second party as a beneficiary in the trust and leased the property to him/her under a triple-net lease (i.e., net, net, net lease, wherein the tenant pays mortgage interest, property tax and handles all maintenance), the resident beneficiary (or investor co-beneficiary) has obtained all the benefits of a standard sale… ‘without there actually having been one.

When proposing that a seller remain on the existing loan for you: if you really want to be assured of ‘getting the deal,’ its important that you make it sound so good for the seller that he can’t refuse.  In order to do that, you’d suggest that for his own safety and peace of mind, you’ll pay to put the property into a neutral trust (‘if he prefers), and that he need never transfer the property’s title to you at all… until you’ve proven yourself, by eventually refinancing or selling the property and paying off
his mortgage.

In this scenario, you’d explain that you’ll consent to merely becoming a co-bene-ficiary in the trust until the loan is fully retired in, say, 6 months (or 3, 4, 5 or 20 years…or more).

Note that this arrangement (i.e., a “Equity Holding Trust Transfer™”) gives you, as the buyer, 100% of the tax write-off (See IRC § 163(h)4(D)); 100% of the use, occupancy, possession; 100% of the equity build-up (from principal reduction); full rights to all rents; and other profits upon the sale or other disposition of the property.

Note as well, that you also have any and all other rights ordinarily only available under the so-called “Bundle of Rights” in any form of Fee-Simple Real Estate
ownership.

In the Equity Holding Transfer™,  the seller needn’t ever take any chances with you; and you don’t have to take any chances with the seller either. By virtue of the structure of the Equity Holding Transfer™, the trust property is protected from liens, suits judgments, divorce actions or claims, bankruptcies or anything else you can think of…’on both sides…’including state and/or IRS tax liens. Moreover, the due-on-sale clause becomes pretty much a non-issue in that the property has not been sold; the title has not been transferred (other than to the borrower’s authorized trust); and there is no consideration for a ‘purchase of real estate’ per se.

In addition, the commodity being transferred (beneficiary interest in a trust) is characterized as Personalty (personal property), and not Realty (real estate), and therefore is not subject to the same creditor rights as would be real estate.  And…the transaction has not infringed upon the lender’s foreclosure rights, or compromised its security interest).

In closing, do note that for maximum safety, it recommended that at least 10% of the trust’s Beneficiary Interest and 50% of the beneficiary’s Power of Direction should be retained by the settlor (seller), with an agreement to forfeit that interest to you upon disposition of the property at the trust’s termination. However, also note that the Settlor Beneficiary’s fifty percent Power of Direction can be given to you by means of either an Assignment of Power of Direction, or by a Revocable, Limited, Power of Attorney.

The reason for the seller’s retaining a percentage of beneficial interest is to satisfy the requirement that if the seller places his property into a revocable trust, he must be and remain a beneficiary of that trust. The reason for keeping the 50% Power of Direction intact, is that most county jurisdictions will not re-assess the property for
property taxes, or require transfer fees, when one transfers its property to a bona fide living trust, so long as no more than 50% of the “voting rights” are being conveyed by the transaction.

 Let Your Buyer Do the Hard Stuff

Confidentially: Patching a nail-hole in the wall of an income property with toothpaste  (‘i.e., where a small picture might have once hung) is excessive refurbishing for me.

The average abandoned & distressed-property investor approaches the rehab and resale process pretty much the same way:

1. They find a Don’t-Wanter” property owner
2. They inspect the property
3. They calculate all costs associated with rehabbing and remarketing
4. They lineup their contractors
5. They commence the work on the property
6. Upon completion, they plant a “For Sale” sign in the front yard
7. They sell the property
8. They smile triumphantly at a job well-done while counting their money
9. They then pay back their bank loan and all of their contractors (‘if they haven’t already done so)
10. Then they get sued by someone…’the new buyer, or a contractor who feels that he/she is owed more money…’or a neighbor that is ticked-off about the rubble left by the contractors, or because a broken sprinkler head is spraying water into their bedroom window. etc..

If you’re following this model, you are no-doubt already succeeding in your real estate investment business: very definitely an enviable position in which to be.  But did you know that by shaking up the order of things, especially if you’re at all cash-challenged, you can dramatically increase the number of rehab projects you complete in a year – ‘and at the same time, be able to reach your goal of financial independence much sooner, whether you are brand new in the business or a weathered and worn Old Salt.

While you can’t do much about these steps as you continue following the same program used by so many successful investors, a few of the steps can be altered a bit – ‘which, over the course of an investing career, could mean earning a lot more money than will any investor solidly married to the traditional model.

It’s easier than you think and may sound a bit corny at first…’but do give the following some serious thought

The first thing you do once the don’t-wanter seller is found and convinced, is plant a large “For Sale” sign in the front yard.  While you obviously want to ensure that your telephone number is on the sign, you can actually modify in order to generate calls from potentially interested, non-traditional, buyers, sellers and other investors.

Here’s an example of language that could be placed on your sign, in order to get your phone ringing early (and steadily):

FOR SALE — SOON, 3BR, 2BA;
1650 sq ft…’Under renovation.

Call now & Choose Paint, Carpet
Cabinet Style & More

Priced to Sell Fast… 803 432-1234

Now, before beginning any interior work, consider just tidying up the front yard, ‘tossing any trash and unsightly detritus ‘into the back yard ‘out of view (for now).  While you may think that the interior of the property is the most important part of a rehab project, I want to tell you that what the outside looks like from the street is what creates “curb appeal” and is that which lures potential retail homeowners in for a better look later.

By creating a Faux Curb Appeal (‘think “movie set”) you have a real opportunity to generate all the cash you need, without incurring debt in the process.

Here’s a simple, easy-to-follow blueprint for success (‘taken directly from a couple of my own experiences in the San Fernando Valley, California, among several other in other cities and states):

• Clean up the exterior in front of the property (i.e., ‘front-yard only) and make it look as close to an immediately livable property as possible. Anything you do on the outside in front needn’t be extensive or expensive.

• Put up your For Sale sign near the street.

• Decide what simple, inexpensive and attractive bushes will maximize the appeal of the property for passer’s by…’(again) for the least expense.

• Next, paint the front of the house a medium gray color (‘i.e., ‘but not the back of the house or the sides…’just the front for now)

• Then frame all visible doors and windows (i.e. visible from the street) with bright white 1″x6″  Pine strips.

• Now paint the front door a dark red (with the same white door frame)

Unless there is already a nice, or restorable, lawn, roto-till the yard (‘front only) and plant a few colorful, full-body shrubs a few feet apart in parallel rows leading from the street to the front door, and along both sides and across the front of the yard.

It’s truly amazing how much curb appeal a property can be given by simply tidying-up and roto-tilling the front yard; ‘sprinkling some wood chips around any trees and the bushes (‘in the front yard).

In addition, don’t ignore the appearance of the house itself. If it has shutters, simply replacing them or painting them bright what (against the medium gray) can instantly double a property’s appeal – and can get people interested in seeing what coming changes you have in mind for the interior.

When tidying up the exterior of the house, ‘you can touch up the paint on the wood trim and do other little things to give the house a fresh, welcoming look. There’s an added benefit to doing things in this order: It is actually possible to sell the property before completing these exterior renovations.

Your “For Sale” sign – ‘combined with the interest-generating landscaping – will likely generate calls from several interested parties (‘and nosey neighbors). When they do call, you can offer to show the property to them as it is now.  And by giving any potentially interested taker the opportunity to pick out the color of carpet, interior paint, etc., you’ll generate tremendous interest because the average homebuyer either makes minor changes immediately after buying a house or makes a mental note to make some changes not long after buying it.

This strategy can be a real winner (‘As it has proven to be for me over the years), and pay huge dividends…

If a potential buyer gets to decide what color they want the carpet and paint to be, they will automatically have more interest in buying than they might if they wait until the renovations have been completed. If they like what they see, and choose to do so, you can place the house under contract t that time and collect an earnest money deposit, or a full Contingency Fund with which you can pay for renovations.

There’s another possible way of selling before completing your rehab, when you willing to “carry the paper” ‘as it were.

Some buyers will ask (or you can offer it) if you would be willing to let them make the repairs themselves, whereby you’d offer them a significant discount for doing so.

Under this scenario your rehab estimate of $20,000 could be converted to a discount for your ambitious buyer of, say, $10,000 or $15,000 (making you five or ten thousand in extra cash in the process).  However, doing it this way is best served by your having the ability to fully control the transaction and being able to allow your buyer into the property without him/her needing standard mortgage financing, ‘a particular down payment amount and/or perhaps without standard credit qualifying. In that the EHTransfer™ system allows for such quick and easy eviction, the posting of a sizeable Contingency Fund can provide quite valuable risk protection, as well as being an excellent deterrent to payment or other contract violation.

In this regard, you would acquire the property by a legitimate mortgage payment take-over, via having the seller place the property into the EHTransfer™, and making you his “Investor Co-Director Beneficiary.”

It’s at this point that you begin locating and installing a third (Resident) Co-Beneficiary in the trust and in the property, who will be contracted to handle all costs of ownership and paying you your desired profit up front (‘without having expended any refurbishment costs out of your own pocket).

Note here that in addition to the upfront amount you receive from your Resident Co-Beneficiary, you can also agree to share a proportionate percentage of beneficiary interest in the trust, which percentage correlates with each beneficiary’s percentage of net-profit that is designated to be shared upon the trust’s termination and resale or refinancing of the property.  I.e., in reference to future profits derived from appreciation and loan principal reduction (‘such profits can be agreed to be distributed in stipulated ratios of  25:75, 40:60, 50:50 or 60:40 percent).

Many buyer prospects with limited cash or credit are quite handy and more than willing to put some sweat equity into the property, particularly if they can save money in the process of becoming “home owners.”.

While you won’t be able to handle every property you buy in this manner, ‘before getting too deeply into your renovation work, these opportunities do come about fairly regularly, ‘allowing cash to flow more quickly into your bank account – and providing a quicker transition to your next profitable investment.

If you would like to do so, you can continue waiting until your renovations have been completed before selling the property, but by following the EHTransfer™ system, you’ll be able to buy more properties…more often…with more asset protection and more “qualified” buyers (‘i.e., in that all down payment and credit-qualification parameters are dictated 100% by you alone.

Moreover, ‘even though a good contract-abiding Resident Co-Beneficiary receives virtually 100% of all Fee-Simple homeownership benefits  (including tax deductions), ‘should any one of  them default in their contractual provision, there is never a need for a long and drawn-out foreclosure action to force dispossession.  A defaulting Resident Co-beneficiary in the EHTransfer™ is removed from the property by means of regular eviction, ‘the same as would be any defaulting rental tenant (‘i.e., ‘without an opportunity to claim holding an equitable interest  in the property (‘that’s held by the trustee)  in order to thwart eviction and attain free rent for months-to-come by forcing a time-draining and costly foreclosure action).

Always Keep the Long Term Hold in Mind.

Over the course of a 20 or 30 year real estate investing career, the EHTransfer™ system can mean that one can quite possibly buy and sell several more properties per-year than might happen otherwise…without money out of pocket; without needing to count on you or any other participant’s needing get new mortgage financing..

Thinking outside the box in this manner and defying anticipated norms is just one way you can blast into increased real estate profitability. ‘Although singularly the best way of all is one’s continuing to learn additional real estate tips, tricks and tactics. That is how you acquire that edge on the competition.

Continuing to learn, can quickly turn an ordinary investing career into a special one that makes you rich beyond your wildest dreams, because of your ability to handle any scenario that others simply don’t have enough knowledge to be able to do.

In case you’re already thinking about it…the EHTransfer™ does not, in any manner, violate any lender’s Due-on-Sale Clause, or compromise any part of the Dodd-Frank Consumer Financial Protection ACT re. Seller-financing (i.e., ‘a party’s ownership of interest in a title-holding trust is personalty (personal property) and not realty (real property), ‘and therefore not an issue intended to be addressed by legislation initiated by senators, Christopher Dodd, Barney Frank, Jake Garn or Ferdinand St. Germain).

I DON’T KNOW WHO THE AUTHOR OF THIS ARTICLE IS, BUT IT IS REALLY WELL WRITTEN, AND I SINCERELY THANK THEM FOR IT (‘FOUND IN MY COMPUTER FILE, ‘BUT WITHOUT ATTRIBUTION OR ANY COPYRIGHT CLAIMS.

While utilizing a variety of credit resources – creative and institutional financing, hard money loans, and even private money – will help you to reach the pinnacle of real estate investing success much more quickly than you could with cash alone, the way you handle your personal finances can mean the difference between success and failure, and how quickly you can reap the rewards available in today’s real estate market. Getting a handle on your debt is much easier than you might think.

Reducing Your Debt Load

Let’s face it: monthly payments are a drag on any budget, but when you’re trying to squeeze every last dollar out of your meager paycheck so you can realize your dream of real estate investing riches, it becomes even more critical that you stretch your available cash as far as possible.

If – like most people – a large part of your monthly spending involves making monthly minimum payments to multiple credit card companies, you’re well aware that this spending enriches the card companies in the form of interest payments, but your balances come down very slowly.

Here’s how to dramatically ramp up the speed and watch those balances drop – and how to avoid increasing those balances with unwise spending.

For this exercise in financial empowerment, you’re going to need a few things:

All of your credit card statements
A calculator
A pen and paper
A beverage of your choosing

Look through each of your credit card statements and list the balance for each one in descending order from smallest to largest. For now, ignore the interest rate for each card. I know this flies in the face of the logic used by many of the so-called financial experts you see on TV, but I have a very good reason for advocating this approach – which I’ll explain more fully very shortly.

Once you have the balances listed, I want you to list the monthly minimum payment for each credit card next to the balances. Take a look at this example so you have an idea of what I mean:

Visa Card #1 $377 balance $15 minimum monthly payment
Visa Card #2 $536 balance $21 minimum monthly payment
MasterCard #1 $1183 balance $36 minimum monthly payment
MasterCard #2 $4219 balance $56 minimum monthly payment
Discover Card $5925 balance $146 minimum monthly payment

Now I want you to think about how much cash you have available on a monthly basis for attacking this debt. If you haven’t already done so, you should have a monthly budget that guides your financial decisions. If not, you need to create a workable budget today based upon your current income and financial situation.

For the purposes of this illustration, I want you to pretend that you can afford to apply an extra $250 per month towards paying down your excessive debt. It may be more or less than this amount, but this will give you a good idea of what I mean.

When you make your monthly credit card payments, I want you to pay the monthly minimum payments on each of your credit cards with the exception of the first one. Instead of giving the first one (Visa Card #1) their minimum monthly payment of $15, I want you to apply the entire $250 that you have for debt reduction, in addition to the minimum monthly payment of $15.

I realize that some of the financial experts advocate that you apply the extra payment money to the credit card with the highest interest rate because, they argue, the interest rate determines the payment and it will take longer and cost more to do it the way I advocate.

They’re absolutely right; it will.

By doing it my way you gain an important psychological advantage that the other approach can’t match. In two months time, Visa Card #1 will be paid in full, which will then reduce the number of credit cards on which you’re making payments. That forward momentum will give you real, tangible results – which will motivate you to continue what you’ve started. You can’t put a price tag on motivation and the sense of financial empowerment that comes from crossing a debt off your list and realizing that you’re making real strides towards actually taking control of your financial life.

The potential savings you could realize by following the advice of these experts is minimal, but if you don’t want to spend a penny more than necessary in order to get out of debt – and you don’t need the psychological victory, feel free to pay off the higher-rate cards first. Don’t waste too much time getting hung up on the process; the progress is what really counts!

Once you’ve taken care of the first card on your list, apply the minimum payment from the first card to the second one, and so on, until you have all of your credit cards paid off.

Controlling Your Spending

While it’s important that you reduce your existing credit card debt, you’ll never be successful if you don’t also control the credit card spending that gave you that debt in the first place. There are several ways you can go about reducing your reliance on credit cards, but in a perfect world, you would just promise yourself that your days of financing today’s wants and desires are over and that you’ll simply pay cash for those items from now on.

The reality is that many people are weak and can’t follow through with simple promises not to spend. If you can’t control the urge to spend, you may have to cancel your credit cards and put your personal economy on a cash-only basis. However, you might want to consider one of a few alternatives to cancelling your credit cards. These are admittedly off-the-wall choices, but they work – and it can be fun explaining to others the lengths to which you were willing to go in getting your spending under control in order to achieve your very serious dream of real estate investing success!

The Ice Baby Technique – This simple technique can help prevent unwise spending decisions by forcing you to delay the urge to spend. Simply place your credit cards in a small container of water – and then stick it in your freezer. Before you can use your credit cards, you’ll have to thaw them out first. While this technique won’t damage your cards, it will put your spending on ice, while giving your better judgment a chance to kick in before making a financial decision that you could regret.

The Boxed Plastic Technique – Rent a safety deposit box at your local bank and place your cards in the box. While you can still access the cards in a true emergency, you probably won’t be willing to drive to your local bank branch and go through the hassle of getting the cards out just to catch a sale.

The Hide and Seek Technique – Another option is to pull all of the shoeboxes out of your closet and to randomly place your credit cards in a box before replacing it in the rear of your closet. Don’t pay attention to exactly where in the closet your credit cards are. If you get the urge to spend, you’ll be able to get to the card – once you locate it.

Granted, these are unorthodox steps to helping you to control the urge to use your credit cards. There’s no doubt that they’ll work. It might seem a little foolish to wait for credit cards to thaw, take a trip to your local bank to “check” them out of a safety deposit box, or hunt for them in a pile of boxes. But they will have the desired effect; they will help you to control your spending.

By controlling your spending, you can get your debt under control, which will give you more money for the very serious business of creating wealth through real estate investing. The profits are real, the lifechanging nature of this opportunity is easily worth the cost, and the time for you to jump into real estate is NOW!

Creative Financing

As profitable as traditional real estate financing can be re. the acquisition of investment real estate, one should never overlook the real benefits of so-called “creative financing” and the myriad ways by which so many otherwise hidden doors to wealth and prosperity can be opened to you…’and to thousands of others who may have been penniless and “credit-less” in the beginning.

The average real estate investor today is not unlike a person who takes an average job with an average company and expects to reap the financial rewards that are typically reserved only for those who take risk and put their very lives on the line every minute of every hour in order to create cutting-edge, innovative products and services, that they, themselves, acquire and administer…’without bosses, time clocks and domination by others whose company stature depends upon standing on the shoulders of those who keep them in their loftier job descriptions by diligently doing as they are told.

While it is theoretically possible, it is none-the-less unlikely–if you’re interested in breaking the mold of mediocrity that is barring the achievement of your highest financial dreams–‘that you ever will do so while being someone else’s employee.

‘If you agree, let’s talk!

In this article I’d like to go in to some  explanation of how creative real estate financing works, and how it can help virtually anyone to achieve real financial rewards by employing some simple strategies and some new ideas that lie well outside of the proverbial “box” for most folks.

It’s often said that there is nothing new under the Sun; however, a closer look at that old and tired adage will prompt a revision thusly: “There is nothing that can ever be needed to create something new, which is not already under the Sun and immediately available to anyone capable of converting thier wishes, wants and unspoken desires to honest Needs.

When you and I rely only on institutional financing sources – primarily banks, credit unions, etc. – we are, by definition, limiting our options due to Fannie Mae and Freddie Mac having strict rules in place regarding the amount of money and credit you must have, and how many mortgage loans they can authorize for you.  With this realization, one has to stop and wonder why the acquisition of income producing real estate (‘or one’s own home) should necessarily have to conform to such institutionally imposed limitations.

The big question:  ‘Why must you and I conform to what everyone else does…because everyone else does?

Who should dictate that someone can’t give me a free and clear house if they so desire?  Why can’t someone give me a house that FNMA FHLMC is not interested in financing?   Why does a government backed or insured lending institution get to dictate what I can buy, inherit, trade-for, take-over or steal?  [Well, OK maybe not steal…the government does enough of that]

Although, the government is there, in theory at least, to protect you and me and our fragile fiat economy: their stringent home-buying and selling rules, ‘no matter how much needed for the sake of free-enterprise, can seriously obscure real investment opportunities for those of us who make some of  our own rules and who don’t mind marching to a different drummer from time-to-time..

This is where creative (i.e. “innovative”) financing comes in.  I.e., instead of going to your local lender for financing, you can instead exercise one of the many creative investing options that are openly available to you twenty-four hours a day and seven days a week: ‘thus allowing you to sidestep many of the “ordinary” impediments that are designed to “protect” most of us; but which also penalize many of us (i.e., Options, Wraps, AITD’s, Contracts for Deed, Bond for Deed, Equity Sharing, Flips, Assignments, fractional ownership timeshares, multiple owner trusts, etc..

“Some Methods of Business Financing Lying Outside the “NORM”

The beauty of creative financing is that just about anything goes...’assuming it’s functional, legal and doesn’t harm anyone. For example let’s say Oprah Winfrey decides to offer a tenant in one of her properties the contractual right to take the property’s title without concern for credit or standard qualifying parameters, ‘that would technically qualify as creative real estate financing, especially if Oprah were unconcerned about a loan-to-value ratio or any particular employment history,

The number and types of creative real estate financing devices are limited only by the imagination of the parties in the transaction, and one’s own ability to clearly and persuasively impart your own knowledge intent and need relative to the acceptability or advisability of the transaction at hand.

Consider this one “extreme” example (‘just one of dozens):

Mr. and Mrs. Jones haves beautiful home with a mortgage balance that is greater than the value of the property, and they no longer wish to own and continue paying on the property.  ‘You happen to know of a friend of yours who can afford the large payments, but has faulty credit and not enough money for a 20% down payment.    ‘Is there any chance of making any money here by solving the problems of the homeowner and your friend…’and your own bank account?

Well then, ‘what if you were to agree to take-over the property and those payments; and then make your friend a partner with you, who for half of any future profits, agrees that he and his family will live in and care for the property at his own expenses, and who is far more concerned with the affordability of payments and the amount of cash necessary for the move-in , ‘rather than about short-term appreciation potential and the property’s resale value in, say, 5, 6 or 7  years?

In this scenario, let’s say the property is worth $300,000 with a loan balance of $350,000 and the payments are $2,800 per-month (‘with, say, 25 years left on the underlying financing).  Instead of  a $75-$85,000 down payment and closing costs of $20,000, you put your friend in the property for $10-15,000 (‘which becomes the acquiring party’s refundable contribution, but which goes into your pocket until the sale or re-finance of the property at some point in the future).  You establish a monthly payment amount of,  $3,200 per-month, along with an agreement to sell or refinance in 5-6 years, ‘at which time, from the proceeds of the disposition. he receives a refund of his original contribution, and you and he share in  the remainder of any profit having been derived from any net appreciation, loan principal reduction, your upt front money and your positive cash-flow over the term of the agreement.

Thank about it:  ‘In this scenario, how much did you spend up front?  (Hint: rhymes with “bluthing”); how much did you pay per-month?  (Hint: rhymes with “cluthing”); how much did upkeep, insurance and property tax costs you?  (Hint: rhymes with “smuthing”); and how much credit risk did you assume when taking over the property and the payment stream?  (Hint:  rhymes with– “nun”)

Possible problems?  

Payments too high for this type of home?   Might the seller prefer paying for, say, the tax-deductible insurance and property tax for a while, in order to avoid the $800 to $1,000 per-month continuing negative cash-flow and maintenance and management costs and responsibilities?

The loan is non-transferable?  One avoids compromise of the lender’s the due-on-sale clause in any loan by placing the property in an inter vivo  trust and instead of selling the property, ‘selling beneficiary interest in the trust (i.e., rather than the property’s title interest. (12USC1701-j-3) 

Owner financing is prohibited (re. the Dodd-Frank Act):  When the property is in the trustee, the only “sale” having taken place is that of personalty and not realty, ‘and not of concern in the Dodd-Frank Wall St. Consumer Financial Protection Act).

What about foreclosing on an errant tenant buyer: When the Equity Holding Trust transfer™ is employed versus a title transfer to a buyer, the tenant beneficiary is never on title and has no basis for claiming possession of “Equity” in the property for purposes of forestalling eviction and forcing a drawn-out and costly judicial foreclosure and ejectment processes. There is never a need for foreclosure: ‘merely a simple eviction process (‘paid for by the mandatory Contingency Fun having been posted by the resident beneficiary at inception). 

What if I and my partner, or either of us, and the seller have disagreements:  Not unlike an escrow process, the trust property’s title is legally and equitably held by a third-party (trustee) who can only respond to mutual direction by all parties acting in concert, whereby intentional failure to comply could bring about a civil or criminal action.

Creative Financing Is Innovative Financing

One should know well that creative financing strategies aren’t simply ways of avoiding down payments. Creative real estate financing is, in essence, an all-encompassing way of looking at the funding of  real estate transactions without needing to rely on the socially-accepted tradition of getting a bank loan with a 20% down payment (‘which system is designed for purposes of ameliorating any risk that the bank might be taking) and making payments for 30 years  or more.

Creative financing can entail no more than pledging small amounts of equity in multiple properties that you own, in lieu of making a down payment on a property you wish to acquire. While it may seem unusual, ‘this process – cross-collateralization – is a creative financing technique that has been used for decades in commercial real estate, and by forward-thinking residential real estate investors.

Cross-collateralization is less common than, say, lease optioning, subject-to financing or even putting government charitable programs to work for you in funding real estate transactions. These strategies can all be used to finance real estate acquisition, disposition and management; and can certainly help to grow your investing portfolio at lightning speed.

Probably the most common form of creative financing today involves the seller’s accepting all or part of the risk associated with real estate transfer, by agreeing to carry the mortgage personally along with a promissory note secured by the property. This, again, can allows for purchase or sale without restrictive credit or down payment concerns.

You might think that the average motivated seller wouldn’t want to consider a creative real estate offer when they could just as easily get all of their cash up-front from another buyer. You’re partially right: the average seller might not be inclined to accept a creative financing offer (‘but you might be shocked to learn how many marginally motivated sellers there are who would indeed consider carrying paper via creative seller-financing).

ost creative real estate transactions don’t involve “average” sellers.  ‘Instead, they involve highly motivated sellers with special needs, whose circumstances simply cannot be addressed by selling their property traditionally to an ordinary, run-of-the-mill investor with access to a line of credit or an unlimited supply of cash. 

Want another example? Read on…

What if you had a property that you absolutely had to sell because you’ve chosen to live nearer to a family member who is receiving radiation treatments due a rare form of cancer?  Then, what if the property you wanted out of had a bedroom “decorated” with a large tree branch having crashed through the roof during a windstorm –i.e., ‘during a period when the property was uninsured due to a memory lapse on your part?

What if you had a a large house with marginal or no equity and not enough family left to fill it, say, during a time of recession in the real estate market?  Might you consider some seller-carry options in order to avoid losing thousands of dollars?  Here you can see how such a circumstance would motivate you to at least consider creative financing if it meant being able to get rid of a burden that you no longer had any use for.

One of the most invigorating aspects of creative real estate finance is that it sometimes involves asking the owner of the property to participate in financing, as in the case of a Contract for Deed, a Lease Option, or a subject-to mortgage take-over.

The world of creative financing is much larger than can be explored here,  and can also include putting government programs to work for you by letting Uncle Sam pay all or part of the costs of acquisition, financing, refurbishment or finding and/or retaining tenants.

Creative real estate financing includes bringing like-minded investors into your real estate projects by using private-money lenders. These private lenders – typically busy executives or others with a desire to earn an above-average returns on their investments – are often willing to lend money for real estate on a short-term wholly asset-based risk.

Yet still another creative financing strategy might be using a self-directed IRA to fund real estate or to accept cash from other investors who wish to use their self-directed IRA for investment opportunities. 

Hard money (asset-based) lenders:  I would be remiss if I were to ignore one final creative financing method: hard money lenders. While hard money lenders won’t necessarily be your first choice in generating real estate investing cash, they are a source that can provide capital when all other options have failed.

You do want to be careful though, when using hard money because rates and terms can be somewhat exorbitant; but in certain cases, they can make perfect sense and can be the difference between having a deal that gets done and one that remains an unfulfilled dream – ‘teasing your consciousness with the promise of untold profits – only to snatch them back at the last second.

Hard money lenders can allow you to seize real estate opportunities that you might otherwise have to let pass: ‘so for that reason alone, they are easily worth the cost and typically easy to work with

Example:  House worth $100,000 wherein the seller will let you have it, but wants some cash up front.  You tell the seller you can give him/her $50,000 in cash if he/she’ll carry the rest for you on monthly payments.  You then borrow out $60,000; give $50,000 to the seller and put $10,000 in your pocket, whereupon you bring in an Equity Holding Trust™ tenant-buyer, or a maybe just a lease Optionee, to make the payments for you.

-0-

Your financial security in this business is wholly dependent upon on your ability to bend and sway with the times and the opportunities with which you are confronted.  “One-trick Ponies” don’t last long in this business.   Motivated sellers come in a variety of colors, shapes, body configurations and intelligence levels; but the one constant that you can always count on is that every single one of them has a piece of property that want you to take them out from under.   In our business we don’t ever need to look for properties: ‘we look only for motivated sellers (…and strangely enough, each of them has a property they don’t need!).

There quite obviously are many challenges before you as you immerse yourself in the creative real property financing business…’and there are some excellent teachers out there who would love nothing more than to tutor and mentor you (‘and one of the best coaches of them all is yours truly, the beloved personal author of this here doggone article.

While there are indeed some challenges associated with learning these varied strategies and techniques, the biggest one before you now is that of accumulating the knowledge you need to make all of it a reality for you…in the shortest amount of time and having someone you can rely on to help you through it all.

Call me @ 800 409 3444 for superior tutelage and professional mollycoddling.

‘Hey, I’m not saying that I’m singularly THE  best in the business: ‘but, seriously: ‘How can I argue with everyone who’s ever known me?   ;o)