Transcript Subject-To Deals

Raising Private Money Online Series
Class 1: Introduction to Private Money Financing
Than Merrill
Konrad Sopielnikow
Chris Yates
Your Coaches
Than Merrill
Chris Yates
Konrad Sopielnikow
Why NOW is the time?!
The Money Tree
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Cash
Partnering
Bank Financing
Hard Money
Subject-To / Owner Financing
• Private Money
• Self Directed Retirement Accounts
What is Private Money Financing?
• Raising and borrowing money for real
estate investments from private individuals
Why Private Money?
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No BANKS or Hard Money Fees!
Better Terms
Speed of Funding
No Credit Check
No Application Process
100%+ Financing!
Relationship Driven
Everything is Negotiable!
Types of Private Money
• Cash
• Retirement Accounts (IRA’s, 401k’s etc.)
• Liquidated Securities and Investment
Assets (Stocks, bonds, mutual funds, CD’s etc.)
• Home Equity
• Personal and Business Credit Lines
• Credit Partners
Where to Find Private Investors?
• REIA and Investor Clubs
• Through Real Estate Attorneys
• Networking with Busy Professionals –
• Attorneys, Doctors, Accountants, Financial
Professionals, Other Entrepreneurs
• Business and Banking Networking Events
• Family & Friends* - Retirement Accounts!!!
• Get OTHERS to raise money for you!
Preparing Your Marketing
• PowerPoint Presentation or Video
– Before and After Pictures or Videos***
• ex. “TRASH TO CASH” from FortuneBuilders
Rehabbing Homestudy Course
• Credibility Packet
– Company Resume / Description
– Case Studies Outline and Pictures
– Investor Program Description & Answers to FAQ
– Business Cards (*Referral Reward Program)
Meeting Investors
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Network, network, network…
Learn about prospect’s current investments & goals
Educate your investor about YOUR business
Describe your private money program
Ask if they know anyone who may be interested in
making high returns and
• Let them know of your referral program
• Set up a follow up meeting when interested
How Does it Work?
Find Unhappy
Investor
Pay Happy
Investor
Private Money
Meeting with YOU
Find Wholesale
Buyer or Fix up
and Sell House
Identify
Property
Get Money & Close
the Deal
Sign & File Investor
Security Docs
Private Money Program
• 12 % Annual Simple Interest Rate
– ex. $200,000 invested for 3 months = ($200k x 0.12
x 3/12) = $6,000
• 6 month term
• Principle and Interest payable at sale
– Monthly, Quarterly interest payments an option
• Secured by subject property
• NOTE: You are the owner on title!
• Guaranteed 1-3 points (for short term financing)
• No costs or effort to investor (closing, processing etc.)
Documents
• Promissory Note
• Mortgage Deed or Deed of Trust
• Hazard Insurance Policy
– Listed as “Mortgagee”
• Personal Guarantee (***when requested only)
Closing Process
Funds From Private
Money Investor Into
Escrow or to Attorney
YOU GET: the House
Closing Documents w/
Mortgage Deed,
Promissory Note
Mortgage or Deed
of Trust Filed at
the Courthouse
INVESTOR GETS: Original of
Promissory Note and Copy of
Mortgage Deed or Deed of Trust
Common Mistakes
or What NOT to Do
• Equity stake in a deal (Money Partner)
• Tours of properties before pre-screening
• Pooling of money between multiple
investors
• Not associating money with a project
Private Money Success Tips
• EDUCATION
– Real Estate Knowledge
– Understanding the Market & Alternatives
• COMMUNICATION
– Defining Your Private Money Program
– Understanding Investor’s situation / goals
• EXCITEMENT FOR THE BUSINESS!!!
– Always Recruit New $$$ Investors
– Networking, Networking, Networking…
Case Study
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124 Smith Street, New Haven, CT
Purchase Price $100k
As is value of $150k; ARV of $200k
Rehab $30k
Investor lending $130k at 12%
6 month note
Paid off in 120 days (4 months)
$130,000 x .12 x 4/12 = $ 5,200 in interest
Case Study
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124 Smith Street, New Haven, CT
Purchase Price $100k
Wholesale value of $150k
Investor lending $100k at 12%
7 day flip
$100,000 x .12 x 7/365 = $230.14
***guaranteed 1 point min. = $1,000
CM Yates – Case Study
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CM Yates Purchase Price = $71,000
Estimated Renovation Budget = $18,000
Closing Costs = $500
Pro-Rated Taxes and Insurance = $1,000
Total Cost Basis = $90,500
Initial Deal Structure
• Investor Funds: $100,000
– Lender Fees: $1,500
– CM Yates Cost Basis: $90,500
Remaining Funds = $8,000
Joe’s Earnings After One Year
• $100,000 Principal Invested
+ 1.5 Points = $1,500
+ Interest @ 12% = $12,000
= $13,500 Earned in 1 Year
13.5% APY
• Secured by Deed of Trust
• Insured by Hazard Policy
Q&A