Podcast Summary
Trying to Use Creative Financing with an Agent's Listing: Direct communication with sellers can lead to creative financing opportunities, despite agents' reluctance. Persistence and understanding of creative finance are crucial in real estate investing, especially in multifamily investments.
Creative financing can be a game-changer in real estate investing, but agents may not always be open to discussing it. In this discussion on the Bigger Pockets Podcast, Rob Abasolo shared his experience of trying to take over payments on a property with an expired listing. Despite calling the agent multiple times, the agent was not willing to bring creative finance to the table due to lack of understanding. However, when they contacted the seller directly, the seller was open to the idea. Rob also emphasized the importance of understanding creative finance in the multifamily space and transitioning from single-unit investments to larger ones using seller financing options. The interviewee, Pace, added that he has a tool called Truepeoplesearch.com to help find property owners directly. Additionally, pre-ordering his book "Wealth Without Cash" comes with a video companion guide for each chapter. Overall, the episode highlights the importance of being persistent and creative in real estate investing and the potential benefits of using seller financing.
Passive income from real estate for accredited investors: Accredited investors can earn passive income from real estate through private funds or turnkey rental investments, providing monthly income without managing properties or tenants.
There are passive ways for accredited or high net worth investors to earn monthly income from real estate without dealing with tenants, maintenance, or property management. PPR Capital Management is an example of a private real estate fund that has provided steady passive income since 2007 through investments in both real estate notes and commercial properties. Another option for those looking to invest with little to no money down is Rent to Retirement, which offers discounted new construction rental properties and investor loans with low rates and down payment options. Whether through a private real estate fund or a turnkey rental investment, the opportunity for passive income in real estate is available for those who qualify.
Rob secured a favorable real estate deal with low interest rate, seller financing, and cash flow opportunities: Rob secured a real estate deal with favorable terms, including a low interest rate, seller financing, and potential cash flow through short, medium, and long-term strategies
Rob was able to secure a real estate deal with favorable terms, including a low 3.3% interest rate on a mortgage, and the seller financing $200,000 with 0% interest and no payments due for the first 5 years. Although the loan would balloon in 5 years, the contract included an automatic extension if refinancing wasn't possible. Rob was confident in the property's potential cash flow of around $2,000 per month on a short-term basis and up to $1,500 to $2,000 per month on a medium-term basis. This deal stood out as it also cash flowed as a long-term rental, providing the "trifecta" of cash flow opportunities. Additionally, the deal came with no credit check, no requirements for job history or tax returns, and no upfront equity from Rob. The transaction was facilitated by a transaction coordinator, and the balloon payment was essentially an amortized loan with the balance due in 5 years. This creative financing strategy allowed Rob to secure a property under market value and set himself up for potential cash flow in the future.
Exploring creative financing methods for real estate investment: Creative financing offers flexibility, saves time, and reduces hassle by providing alternative ways to invest in real estate without traditional mortgage financing. However, it's crucial to understand the specifics and potential complications of each deal.
Creative financing, such as subject to deals and taking over existing loans, can provide alternative ways to invest in real estate without the need for traditional mortgage financing. These methods can offer flexibility, save time, and reduce the hassle of getting approved for a mortgage. However, it's essential to understand the terminology and the specifics of each deal to avoid potential complications. As mentioned, resources like The Rookie Show with Pace can help clarify these concepts. Additionally, real estate investing requires patience and a willingness to learn the lingo at your own pace. It's not a get-rich-quick scheme, but the potential rewards can be significant. Moreover, the concepts in multifamily investing may seem confusing due to the different terminology used, but once understood, they are similar to those in single family investing. Overall, creative financing strategies offer valuable alternatives for those looking to invest in real estate.
Negotiating Creative Financing in Multifamily vs Single Family: In multifamily deals, sellers are often more experienced with creative financing methods like hybrid deals, making negotiations smoother and more efficient.
The world of creative financing in real estate varies between single family and multifamily properties, with the latter often involving more savvy sellers who are already familiar with financing methods like seller financing. A term that came up during the discussion was "hybrid deal," which refers to a combination of a sub 2 mortgage and seller financing. This type of financing can be beneficial when a seller has a significant amount of equity in a property. The key difference between negotiating creative financing deals in single family and multifamily markets lies in the seller's understanding of these financing methods. In single family deals, sellers may require more education and explanation, while multifamily sellers are often already well-versed in these financing strategies. Remember, when dealing with multifamily properties, you're likely to encounter more experienced sellers, making the negotiation process smoother and more efficient.
Differences in Financing and Valuation for Larger Multifamily Properties: Investors in larger multifamily properties use more complex financing and valuation methods, source deals through various channels, and face challenges in timing.
The financing and valuation methods for multifamily properties with 5 units or more differ significantly from those with 4 units or less. This distinction is crucial because it impacts the way these properties are valued using net operating income and cap rates, rather than comparable sales. In the larger multifamily space, commercial real estate investors are financially sophisticated and use terms like "vintage balloon payments," "agency debt," and "net operating income." They often find deals through expired listings, which can be sourced from the MLS or other websites, and then directly contact the sellers to negotiate. The challenge lies in the timing, as agents may become less motivated after 100 days on the market, indicating potential difficulties in selling the property.
Creative financing can lead to successful deals despite agent resistance: Agents may not understand creative financing, but investors can reach out directly to sellers and close deals through alternative financing methods. Agents struggling to make more money could learn creative financing and profit from it.
Creative financing offers can lead to successful deals even when traditional methods fail. However, agents may not be knowledgeable about creative financing, making it essential for investors to reach out to them directly. The speaker shared an experience where he called an agent 16 times to propose taking over payments in exchange for commissions, but the agent refused. Eventually, he contacted the seller directly and closed the deal through seller financing. The speaker emphasized that top-performing agents are more likely to understand creative financing, leaving room for others to learn and profit from it. He suggested that agents struggling to make more money could learn creative financing and approach expired listings to secure sub-2 and seller finance deals. The speaker also shared a hack where he pitches creative finance offers to agents and sellers over Zoom, allowing agents to protect their clients and avoid presenting the offer themselves if they lack knowledge.
Effective communication is key in real estate negotiations: Use analogies, metaphors, and relatable stories to explain unfamiliar terms and bridge understanding gaps. Avoid industry jargon and communicate in simple terms to build trust and close more deals.
Effective communication and storytelling are essential when trying to negotiate real estate deals, especially when using unfamiliar terms like "terms selling" or "subject to." The use of analogies, metaphors, and relatable stories can help bridge the gap in understanding and overcome initial hesitation or mistrust from sellers and agents. It's crucial to avoid using industry jargon and instead, explain concepts in simple terms that anyone can grasp. By using this approach, investors can build trust, establish rapport, and ultimately, close more deals.
Exploring creative financing opportunities in multifamily real estate: Long-term sellers with significant equity offer unique financing options, focusing on smaller multifamily investors can lead to more deals, and 'mom and pop' sellers may benefit from seller financing
Creative financing in the multifamily real estate market can lead to unique and beneficial deals for investors. Sellers, particularly those who have been in the game for a long time, can offer options like balloon mortgages with extensions, which can be advantageous for both parties. Focusing on smaller multifamily investors, those between 12 units and 150 units, can lead to a higher likelihood of seller finance deals. Additionally, looking for sellers who have owned properties for over 20 years and have significant equity can also increase the chances of successful seller financing transactions. These sellers, often referred to as "mom and pop" investors, may not have the resources to make necessary repairs and upgrades, making seller financing an attractive option for them. The creative financing opportunities in multifamily real estate can lead to mutually beneficial deals and a more diverse investment portfolio. For more details, check out episode 527 for the full story on how creative financing came to fruition with PACE.
Time to close a real estate deal varies for single family homes and multifamily properties: Single family homes can close in a day, traditional processes take 7-10 days, while multifamily properties take a couple of weeks due to complex business processes.
The time it takes to close a real estate deal varies greatly between single family homes and multifamily properties. For a single family home, it's possible to close a deal in as little as a day, although this is not the norm. Traditional closing processes, involving title companies, attorneys, and inspections, usually take around 7 to 10 days. However, for multifamily properties, the process is more complex due to the business nature of these deals. Due diligence, inspections, and other processes take longer, and a safe estimate is a couple of weeks for closing. It's important to remember that every deal is unique, and factors such as the specific property, the seller's situation, and the buyer's preferences can influence the closing timeline.
Uncovering Hidden Income in Multifamily Deals: During due diligence, verify income and expenses by accessing bank statements, identifying paying tenants, and evaluating management teams to avoid misrepresented financials in multifamily investments.
When it comes to due diligence for multifamily investments compared to single family, the financials are often intentionally misrepresented by sellers. This is due to the fact that many small multifamily property owners don't keep accurate records to hide income from the IRS. During the due diligence process, it's crucial to dig deeper and "underwrite" the property by obtaining access to bank statements, understanding who's paying rent and who's not, and verifying income and expenses. Additionally, evaluating the current management team is essential as you'll inherit their employees and company culture once the property is acquired.
Understanding the intangibles in multifamily property investments: Thoroughly examine intangibles like culture, leadership, and contracts during multifamily property due diligence to ensure a successful investment
When it comes to investing in multifamily properties, it's crucial to thoroughly underwrite every aspect of the business, not just the numbers. This includes interviewing employees, auditing their work hours, and examining contracts with vendors. Buying a multifamily property is similar to buying a business, and intangibles like culture and leadership are essential. Paying a fee for underwriting services or bringing in a partner as an equity holder are both viable options, but consider who will be financially responsible for any potential issues that may arise. The due diligence process is extensive, and it's essential to put in the necessary time and effort to ensure a successful investment.
Passive income from real estate investing: Investing with a company like Pine Financial Group for passive income or using home security systems like SimpliSafe for peace of mind are effective ways to engage with real estate. Maximize returns by working with experts in real estate tax benefits.
Real estate investing offers various ways to earn income, both actively and passively. For those who prefer a hands-off approach, investing with a company like Pine Financial Group can provide passive income through lending to house flippers. This investment comes with attractive returns, security, and the added benefit of contributing to community revitalization. Meanwhile, for property owners concerned about safety while traveling, home security systems like SimpliSafe offer peace of mind with advanced features and professional monitoring. It's crucial to ensure that professionals, such as CPAs, possess the necessary knowledge in real estate tax benefits to maximize returns. The importance of education and finding experts in their fields cannot be overstated in creative finance.
Maximizing Tax Savings with a CPA in Real Estate: A CPA with real estate experience can help buyers maximize tax savings through creative financing and guide sellers in deferring capital gains taxes.
Hiring a CPA who doesn't invest in real estate may not fully understand the nuances of creative financing and its tax benefits. A CPA with real estate investing experience can provide significant value by helping you maximize your tax savings and guiding sellers in mitigating their capital gains taxes. Creative financing, such as a sub-two deal, allows you to buy a property with little money down and receive immediate tax benefits, while sellers can defer their tax liability. This arrangement benefits both parties. It's important to remember that the seller's name remains on the mortgage, while your name appears on the deed. The deed is the receipt of ownership, making the transfer of this document to your name the essential part of the deal. Overall, creative financing offers a win-win situation for buyers and sellers, and having the right professionals on your team is crucial to navigating its complexities.
Owning real estate during high inflation: During high inflation, owning real estate provides more value than the note or loan due to asset appreciation. However, real estate ownership involves risks like property taxes, insurance, repairs, and the due on sale clause.
During periods of high inflation, it's more beneficial to own the appreciating asset, such as real estate, rather than the note or loan. This is because the value of money decreases over time, and the owner of the asset ultimately gains more value. The lender, on the other hand, may not keep up with the asset's appreciation and may even lose money due to interest payments. The discussion also touched upon the importance of understanding the risks associated with real estate ownership, including property taxes, insurance, and repairs. Additionally, the due on sale clause was mentioned as a potential risk for sellers, but it's not as significant a concern for buyers, especially when using executory contracts. Overall, the key takeaway is that real estate investing involves various risks and rewards, and it's crucial to be aware of these factors when making investment decisions.
Exploring Creative Finance Strategies: Creative finance strategies offer opportunities but come with risks, such as balloon payments. Extensions and alternative financing methods can help mitigate risk. Understanding legal and practical aspects is crucial for buying subject to or selling on a wrap, and evictions and foreclosures may still occur.
Creative finance strategies offer unique opportunities for real estate investors, but they also come with their own set of challenges. A balloon payment, for instance, can leave an investor in a tough spot if the market value drops and they can't refinance. Extensions or alternative financing methods can help mitigate this risk. Additionally, creative finance strategies, like buying subject to or selling on a wrap, require a solid understanding of the legal and practical aspects of the transactions. Evictions and foreclosures can still be part of the process, just as they are in traditional real estate. For a comprehensive understanding of creative finance, check out the upcoming book "Wealth Without Cash" by Pace and David Greene, which includes both definitions and detailed video explanations.
Seizing unexpected opportunities in real estate investing: Unexpected opportunities can arise during negotiations in real estate investing, and it's important to be open to them. Listen to experts and learn from their experiences to expand your knowledge and grow your portfolio.
Sometimes unexpected opportunities can arise in real estate investing, even during negotiations. In this case, a seller from Boston, who was in Phoenix at the time, visited the studio to finalize a cash deal for a duplex, live in front of a studio audience. This unique experience is detailed in the first chapter of Pace Morby's book "Wealth Without Cash," which comes with a video companion guide. The seller was surprised by the experience and appreciated the transparency. Pace emphasized that this was not a regular occurrence and encouraged listeners to preorder the book for valuable insights into creative financing. Pace also shared that he is an avid podcast listener and learns from various experts, including Henry and David, who were also present in the podcast. To get a copy of the book or learn more about Pace, listeners can visit biggerpockets.com/wealthwithoutcash. Pace also encouraged listeners to check out his YouTube channel for additional resources and to send him deals or questions via DMs. Overall, this podcast episode emphasized the importance of seizing unexpected opportunities and learning from experts in real estate investing.
Find investor-friendly agents for real estate success: Use BiggerPockets Agent Finder to connect with local market experts and expand your real estate investing journey
Achieving financial freedom through real estate investing can be a challenging journey, but the best investors understand that it's not about timing the market perfectly, but rather maintaining a consistent presence in it. If you're eager to enter or expand your real estate investing endeavors, finding an investor-friendly agent is crucial. BiggerPockets Agent Finder is a free resource that can help you quickly connect with local market experts who can guide you through neighborhoods, number analysis, and confident decision-making. Visit biggerpockets.com/deals to enter your buying preferences and receive instant matches with investor-friendly agents. Remember, past performance doesn't guarantee future results, and always consult with qualified advisors before making any investment decisions. BiggerPockets LLC disclaims any liability for damages arising from reliance on this information.
