How to Creatively Finance Your Real Estate Investments and Build Your Personal Fortune: What Smart Investors Need to Know - Explained Simply

Alvis

How To Creatively Finance Your Real Estate Investments And Build Your Personal Fortune: What Smart Investors Need To Know—Explained Simply

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ISBN 10: 0-910627-04-5

ISBN 13: 978-0-910627-04-7

Library of Congress Cataloging-in-Publication Data

Alvis, Susan Smith, 1969-

How to creatively finance your real estate investments and build your personal fortune: what smart investors need to know explained simply / Author: Susan Smith Alvis.

p. cm.

Includes bibliographical references and index.

ISBN 10: 0-910627-04-5 (alk. paper)

ISBN 13: 978-0-910627-04-7 (alk. paper)

1. Real estate investment--Finance. I. Title.

HD1382.5.A483 2007

332.63’24--dc22

2006035620

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Table of Contents

Foreword

Preface–Finding the Perfect Property Using the Perfect Agent

Chapter One–The Way Things Were Many Moons Ago

Chapter Two–Finding the Perfect Property Using the Perfect Agent

Chapter Three–Do Not Touch That Bank Account

Chapter Four–Living on Borrowed Dimes

Chapter Five–Negotiating with Sellers to Get the Financing You Need

Chapter Six–Using the Investor’s Money and Credit

Chapter Seven–Options Are Gold

Chapter Eight–So You Want to Be a Landlord

Chapter Nine–Finding Deals in Vacation Rentals, Foreclosures, and Subject-to Deals

Chapter Ten–The Financing You Need

Chapter Eleven–The Undesirable Properties

Chapter Fourteen–On the Contrary, I Am Speculating Successfully

Conclusion

Glossary of Terms

Appendix

References

Author Dedication and Biography

Foreword

Most people work hard all their lives, save some money, and are disappointed in their lifestyle if they are finally able to retire. Many people today are worried about their own retirement, especially with the much-publicized woes of the social security system, and with fewer and fewer companies offering secure pensions. Some people dream of a better life—a life filled with an abundance of wealth and free from worry. Only a few people take the necessary actions to make their dreams a reality.

Napoleon Hill said, Whatever the mind of man can conceive and believe it can achieve.¹

Most people will never be able to achieve great levels of wealth merely by saving money. Sure, if you start early enough, earn an above-average income, live frugally, and save prodigiously, you can create a comfortable retirement. Nevertheless, most people will not figure all this out early enough in life. Most will need to find some method of using leverage if they are ever to build assets and cash flows sufficient to power a wealthy lifestyle in retirement.

Leverage is one of the most important tools used in the building of every great fortune. Using other people’s money and other people’s time will enable you to do exponentially more than you could ever do by yourself.

This book shows you many of the ways successful investors have literally created something out of nothing—and the ways you can do the same thing for you and your family.

I know these techniques work because I have used some of them myself.

When my wife and I purchased our first home, we had no money saved for the required down payment. Therefore, we used creative financing to purchase the home. As the home appreciated, we began to grow our net worth for the first time ever.

A couple of years later, we wanted to begin buying rental properties, yet we still did not have excess cash. Again, we used creative financing, this time obtaining owner financing from the seller.

We kept using various forms of creative financing for our subsequent purchases, even after the earnings from our first investments would have made it easy to buy without using creative techniques.

Why? Because creative financing offers so many advantages. For example, when you have no financial investment (or a very small one) the rate of return can be phenomenal. Additionally, creative financing often can save you money, either by minimizing closing costs, getting a lower interest rate, or negotiating other favorable terms. And of course, you can build your wealth so much more quickly when you can buy more properties, and this is much easier when you use creative financing. You too can reach tremendous levels of success through real estate investing.

Leverage is incredibly powerful, and it can either help you or hurt you. Susan Alvis shows throughout this book how important it is to use these techniques wisely and judiciously. If you do this, you will be able to smile as you watch your wealth growing safely and securely. One day, when many of your peers are still working just to survive, you will be enjoying the good life in a very secure retirement.

Norm Biller

President, The Biller Homes Team

Norm Biller leads one of the highest producing real estate consulting and sales teams in Lexington, Kentucky. He is also a real estate investor. He holds a Kentucky real estate broker’s license.

Table of Contents

1 Napoleon Hill, Think & Grow Rich (New York City, New York: Ballantine Books, 1983), 32..

Preface

Finding the Perfect Property Using the Perfect Agent

Years ago entrepreneurs invested in real estate using traditional measures and that is all they knew how to do. Buying real property meant paying cash for it or financing it. If someone without cash wanted to buy a home or piece of land, he or she simply went to the local bank and borrowed the money. It was the way to do business when you wanted to purchase any real property. Not anymore. While the majority of investors and home buyers still go to a bank or mortgage company to borrow money, more people are discovering the art of the creatively financed real estate deal.

If the buyer wants to buy the property that the seller wants to sell, they can work together to make it happen by using creatively financed deals; something anyone can do by just taking the time to learn how. As a real estate agent in the ‘90s, I learned my job was to bring buyers and sellers together as quickly and effectively as possible, but one thing was always evident: if either one of the parties decided not to compromise, the deal died. When creatively financing properties, both buyer and seller must work toward an amicable goal of closing a property. Most of the time, when you have a would-be deal fall short of the closing table, it is because one or both parties refused to come together.

Smart investors know what it takes to take a deal to the closing table no matter which side of the table they happen to be sitting on at the time. You see, sharp investors will do what it takes to make everything come together because they like to buy and sell. They like to trade in real property. They are similar to many of the investors you would find on Wall Street. Real estate investors know as long as they are turning properties and watching those properties close at a closing table, they are turning money and that can mean big profits. Investors who are willing to work together will not waste time getting the deal to work. Why waste their time when they could easily be adding up their profits?

Creative financing for investors and homeowners is much easier today than in the past. Today, deals close with more frequency using a purchase-money mortgage. It is easier to get a bank and seller to work together to provide the lending package and if not, a mortgage company is on every corner. Plus you have the dot coms to fall back on, too. The future of lending lies in the virtual world and many of the businesses on the net are already becoming a mainstay.

When I sold real estate in the ‘90s, lending was much different. While the Internet was on the rise, finding reputable companies you could trust on the web was questionable. Now, there is a great lender to be found anytime you need one and they are really only a click away.

Today, investors are fortunate. They have so many tools they can use which can help them in their business. They can use the Internet to perform searches which can enable them to do their own comparative market analysis (CMA), check interest rates, find homes for sale all over the country, watch for FSBOs (and actually be alerted when one meets their needs), and so much more.

There have been more changes for the better only recently. The fact that many people used to have to go to the closing table with anywhere from 5 percent to 20 percent of their own cash was enough to stop potential investors in their tracks. Creatively financing real estate took off after the famous late night infomercials of Carlton Sheets ran rampant. Sheets not only told people how to do it but he showed them. Some even followed his suggestions and amassed wealth. Many investors had never heard of no-money-down and had never really formed any ideas about the creatively financed package. Some sellers could not fathom why anyone, as a homeowner would want to finance a property for someone they did not know. The entire concept of seller-financing seemed risky.

Sheets and investors who followed him showed people how creative financing could be done and laid out the money trail. On TV infomercials, the viewing public saw case study after case study and slowly it became apparent: these methods of creatively financing properties indeed worked for someone. (Either that or there were several ordinary people being paid to stand in front of some magnificent homes claiming to own them.)

Live footage showed the woman, barely able to feed her children, start to accumulate properties. The young couple who would have been renting started growing their investments from their first year of marriage. Sheets showed investors how the multi-million dollar lifestyle was possible for a young couple in their early twenties. It made multi-level marketing look like child’s play. The reason? Well, that was obvious. Sheets offered to put Americans back into their own dreams. He offered people a way to make a life for themselves out of something tangible, and his ideas and philosophies made sense.

Soon people began to practice what Sheets had preached. Creative financing became common practice in real estate. Investors really started to shake things up a bit. It became obvious investors who wanted to buy properties would soon find a way to leave banks and traditional forms of financing to someone else. Why should they finance purchases through a traditional lender if they had a seller willing to be their banker? Creative financing had taken hold in the marketplace.

Now individuals know how to use someone else’s money and credit to finance real estate purchases. They know how to profit from foreclosures and deal with judgments and liens. They use wraparound mortgages and second mortgages to find the money they need in their real estate dealings. In a word, real estate investors today are savvy. They watch the world markets and take notes. They study the trends and find out what outside forces will affect the housing sector. They gather information and then they use it to buy and sell when it’s most advantageous.

The reason real estate investors are so savvy is because they have learned how to build a fortune based on solid assets. They know how to use little of their own cash to build wealth beyond anyone’s wildest dreams. Best of all; they are able to find a way to accumulate wealth while helping others do the same by owner-financing their properties to other investors and first-time home buyers. They rent-to-own their properties and carry the paper on the homes they sell. They have learned how to be more than a landlord and are earning more money than ever before.

The neat thing about some of these talented individuals is that they are really able to walk away from what many of us consider an ordinary job and build a career from home. They work when they want to work and have built a legitimate, productive business right under their own roof tops.

How to Creatively Finance Your Real Estate Investments and Build Your Personal Fortune: What Smart Investors Need to Know –Explained Simply is going to be your reference as you embark on a new way to invest in real estate. This book will help you find a smarter way to sell and put more money in your pocket quickly. It will help you prepare as you creatively finance your properties and begin to build a real estate fortune. You can use the tools in the Appendix as you begin to offer your properties for sale to other buyers who are in search of homes using creative financing. You will find most of your questions are answered as you begin to accumulate investments of substance. Below, you’ll see where this book is going to lead you.

In Chapter 1 we will look at the way the real estate market used to work. We will explore how people used to depend on the wisdom and the funds of the traditional lender when they were buying and selling their investments. Then, we will look at new and more creative ways to finance your investment properties.

In Chapter 2 we will delve into why it is important to use a real estate agent even when your goal is to finance your property through a seller or to find properties that are not typically agent-listed. You will discover real estate agents who know market trends and are up-to-date on your local market, can actually save you money and uncover properties for you. We will look at why you may want to have a real estate agent in your corner.

We will look at financing your investment properties with as little of your own money as possible in Chapter 3. We will glance at the preliminary steps you should take before you buy a property such as credit repair and budgeting for your investment properties. We will discuss the expenses involved in handyman specials, and I will show you how you can tidy up your fixer-upper with as little of your own cash as possible. You will even discover how to buy your investment holdings with no money down.

In Chapter 4, we will view how you can literally invest on borrowed dimes. We will take a look at how savvy investors are using funds and credit of willing participants to finance their investments while offering outsiders the chance to make money on their real estate transactions. We will discuss loans and fees associated with buying and selling real estate and show you what to expect when you go to the closing table.

Chapter 5 will explain how to negotiate with sellers to finance the property you want to buy creatively. We will take a glimpse at why it is important to get a seller in your corner so you can write winning proposals that your bank or lender will like. We will look at the best way to write winning offers-to-purchase worthy of a seller’s consideration while helping you secure more creatively financed deals.

Chapter 6 takes a serious look at using the investor’s money and credit. We will look at the reasons an outside investor will want to help you and how to use the credit-worthy businessman to help you get what you want, while allowing them to profit also. You will learn different ways to use the real estate entrepreneur to finance your ventures. In short, you will create a win-win situation for everyone.

Chapter 7 will teach you everything you need to know about options. You will understand the best