Beyond Traditional: The Power of Creative Financing in Today's Market

I want to help you have an absolute breakthrough year this year, and it's 100% up to you because the tide has turned. It's past whether it's happening or not, and there's some huge opportunity in creative real estate, and you can be part of it. All right, guys, Chris Prefontaine with another Deal Structure Sunday. This is actually a deal we did, as of the filming anyway, literally just yesterday, took care of this deal. Walk you through this because for one thing, I'm going to give you nuances throughout the, throughout the deal here. For one thing, the referral— I mean, the source here is a referral, okay? And I think that's cool in and of itself because think about something for a second. Not just this deal I'm about to show you, but once you get a few realtors, a few mortgage brokers, um, a few contacts— could be home inspectors, whatever— referring you business You start racking up 3 paydays and you say, wow, if I get 2 referrals from one person, one from another, and 2 from another, that's 5 referrals. The 3 paydays are running these days $45,000 low, high recently, new high in the $300s. Significant. So it's worth you establishing some referral relationships for sure. Okay. Um, all right, well, let me move this for starters because I put that the wrong spot. So deal type is going to be a sub-2. And I'm going to tell you why. I don't do, when I can help it, a term on sub-2s, but there's an equity piece here, so it's sort of a sub-2 owner financing hybrid. And the term for the owner financing piece is 48 months, and I'll talk about why we do that and what's going on there. Okay, um, the debt— I'm going to use round numbers here, not cents— the debt is around $319,000. Um, we gave them— whoops— $31,000. We didn't give it to him. It's gonna be no interest, no payments, 48-month balloon. But if you total these, I believe that comes to $351,000, right? No, $350,000, sorry. $350,000 even. If you go onto Zillow today, and please don't rely on Zillow for comps, I'm just giving you a reference. If you go onto Zillow today, this property lists in there for like $380,000. My son Nick went on and found a comp immediately for like $381,000. So we're super comfortable with what we did there. Even if it was a little higher, we would've been. Sell price. Now, please, disclosure here. We're going on the market with this this week as of the time of this filming. So when you see this, you can ask me what happened, but we're going to start at $399,900. I think we're going to get that all day long on terms. This house is in Florida. We're going to budget a deposit from the buyer of $40,000. Now, as some of you may or may not realize, if you're new to this, this PlayStation with the channel with the deal structures. This could be over time or this could be all up front. I don't know. And so again, you can ask me if you want. Come to one of the Wicked Smart sit-downs that take place every Thursday at 4 o'clock. They're free for you. And just say, hey, how'd that Florida deal go? We'll talk about it and we'll tell you what the nuances were, the buyer and all those things, because at that time we'll probably have a buyer, right? So come on and talk to us about it. Monthly payment to the, to the bank, PITI, is $2,137. So if you're new, that's principal, interest, taxes, and insurance. We're gonna go on for $2,450. Now, on occasion, we'll go on for $2,450 and then we'll tack on the tax portion just so the buyer gets used to, okay, I have this payment, just like, hey, I have this mortgage of principal and interest and now I have to add my taxes. That's a homeowner behavior. Sometimes we'll do that, but I'm gonna keep this skinny and tell you that that's all we're gonna do right there. So the cash flow there Is what, about $313? If you take that over 48 months, that's $15,024. I'm looking at my cheat notes here. So we got a payday 1— again, ask me later how we did— payday 1 proposed of $40,000, payday 2 of $15,000. Let me show you how this next piece works. I think it's super important for you to understand. We have a price premium here of $49,900. Now this loan, this underlying loan of $2,137, today has about a $650 paydown. Uh, for those of you who have a mortgage, you understand that if it's today it's $650, tomorrow, next month it might be $653 or whatever it is, or $659. Here's the punchline here. So, so this, so this number is always going to be conservative. We're using $650. Here's the punchline here. This, this loan, I thought it was in the 3s when I first started talking to this prospect, and I'll tell you Some conversations in a minute. But this loan has an interest rate of 2.6%. Guys, this is why sub-2 is so important for you to understand, get good at, have a dream team that knows how to execute on that, meaning the attorneys that do this for you and know how to do it safely, legally, and properly and profitably. Okay? Because 2.6% is like free money now. You know that with rates hovering in the 7s or whatever, even if it was in the 6s. Learn how to do this stuff so you can secure a property for yourself, your family, or as you're part of your business. Okay. All right. So principal paydown is going to be roughly $31,200. I'm rounding. We got to give them credit for the $40,000 though, right? At the closing table when this thing closes out, it's like any other deal. And so that makes the payday 3 about $41,100. All 3 paydays then is $96,124. And that's again, if you're new to these deal structures, that's taking payday 1, payday 2, payday 3, and you got down here $96,000. Now, a couple things here to talk about. Might that $96,000 be lower, lower if the buyer cashes out earlier? Yes. Might it be higher if we extend the buyer because we don't have any clock ticking? Do we have a clock ticking on the 48 months for the $31,000 up top here? Yeah, we do. Let me change colors here. So we have, we have a $31,000— I didn't change colors. We have a $31,000 due in 48 months. Okay, that's fine. Please know that there are so many ways to get that done. We can have the buyer cash out, which is conventional, or we can just use another payday 1 or payday 3 from another deal. And let's hypothetically say we're in year We're in month 13 of this deal and we call the seller and say, hey, I know in 3 years almost we owe you $31,000 and I may be coming across some cash. I'm calling all my sellers. If I was to come across some cash and pay you off, what's the least you could take? Please understand that 36 months seems like an eternity to them, so they're probably going to drastically discount that. I would think they would get that for like $20,000. $20,000. 22, 25 tops, or else I wouldn't do it. Just wait for the other 3 years. Okay. All right, dude. Again, come to the Wicked Smart Sit Down if you want nuances on the buyer side, and, and hopefully Nick or I will be on. And if we're not, we'll come on the following week, or you message support@smartrealestatecoach.com and say, I want an update on the next sit down when Chris or Nick could come on and give an update on the, on the buyer. And as soon as we sell it, we'll come on and we'll get ripped out of pot and talk to you about it. Okay. All right. Nuances for the seller. This was referred to me by the seller's mom. I don't know the mom. She just knew of us and said, these guys will get it done. So when you have a referral, like I opened up the deal structure and I said referrals are strong, the likelihood of you getting a contract, a house under contract, which we call it taken, when it came from referral is much higher than a VA call, expired, or FSBO, right? Okay. That's number one. Number 2, I was— I'm not in Florida. So one of our associates, I said, hey, we'll give you a percentage of the deal. You want to kind of be our boots on the ground? You can learn while we do it. They said sure. So they went out for me. When they went out, they said, Chris, I don't know what it is. Some of the rooms— the house is brand new. It's not that old. It's in a new community. Next to it's conservation land for owls. Like, it's just everything screams really cool sellable house. They're moving to Texas. She said they didn't say why, but they just kept saying they had to get it done and wanted to move on. And that there was a few rooms already packed. So I said, hmm, interesting. She also told me that there was a few houses in the neighborhood for sale. So here's what I did. And this is a technique, guys. I'm going to take my calculator out and do it with you. This is a technique that I teach the High Six and the Champions all the time. When you're on the phone with a seller, I did it by email. I was speaking with the husband back and forth who I've yet to talk to live. And on email he said, normal negotiation as a seller, He said, there's some comps down the street for $370,000. There's one on the market for $370-something. I said, I get that, but here's what I did. Took my calculator out. I said, his name was Andrew. I said, Andrew, let's go with $370,000 like you're saying in your email. I said, in your marketplace, 'cause these houses are on the market, I said, let's say that you get 97% of ask, but then you have to pay your realtor 6%. So you gotta go 94%. Now you're down to $337,000. You owe $319,000. That leaves you with $18,366. Hmm. So what's better? You can take your $18,366 now if it sells, and if that happens, you might get less, and you have to pay your closing costs out of that, your transfer tax and all that. Or you can wait 4 years and we'll give you $31,000. It's a win-win. Long story short, uh, he, he did it because we got that signed. He yesterday as of the time of this filming. We're wrapping it up today to put on the market. Okay, so if there are any questions on this, just reference the Florida deal that Chris did and send it to support@smartrealestatecoach.com. Now, for those of you guys out there that are not associates yet, I can't for the life of me understand why, because we do deals with you. But, but if you don't want to or you think you don't have the resources— because if you really knew you could succeed, you'd find the resources— but if you, if you're out there and you just go, yeah, but I come across deals, I'm a wholesaler or a rehabber, or I just see deals that I think I don't know how to do them, but I know they'd probably be cool creative real estate deals. We will do them with you. You won't get a big cut like an associate would for revenue sharing, but we will pay you a referral fee and you can learn as we go because you'll probably do a walkthrough for us and you'll probably help with the buyer meeting. You'll probably help with the inspections and you'll understand what's going on. We'll probably include you in some of the emails just to help you learn. So that's a possibility for you. We do have an entity, the very one doing this property. That, um, we'll do those deals with you, okay? Even if you're outside our community. Just food for thought. If you're interested in chatting about that or anything else we do, frankly, let me give you my personal link. But please, um, I want to just give you disclosure. If you want to chat, I want the serious and committed people that just go, hey, I, I don't know what I'm doing, or I'm frustrated, or I need money, or whatever it is, and I want to fix it. And if you're keen on fixing whatever you got going on, or progressing, or you're a current investor and you want to You're understanding that the tide's shifting to creative big time and you want to see how to implement that? Let's talk. Go to smartrealestatecoach.com/chrisprecall. /chrisprecall. While I'm on links, let me just grab a piece of paper here while I'm on this. I'd like every single one of you to be at our upcoming events, and I, I actually will give you both links. wickedsmartsummit.com is every spring. So go to that, that account, that website in case it's past that and, and just check out the dates. And qlslive.com is our big sort of Super Bowl event that we hold in September, and this year it's in Boston. So spring is in— is virtual this year, and, and September is in Boston. Very easy for you to fly into and just bop over there. Okay. Um, if, if you catch this before the summit, I want to give you a 50% off ticket because I want you there. It's virtual. It's going to be, uh, March 20th, 21st, and 22nd, but it's only 10 to 3, 10 to 3, and 10 to 1. You can power that out with us. So when you go to smartrealestatecoach.com/summit and use the coupon code PODCAST50, we give you 50% off. Okay, uh, I want to give you a gift. If you don't have our books, go to wickedsmartbooks.com/podcast. Um, I can't imagine again why you wouldn't have the books, but if you don't have to go to Amazon, just wickedsmartbooks.com/podcast. Hope that helps, guys. Gave you some freebies, gave you some direction. I want to help you have an absolute breakthrough year this year, and it's 100% up to you because the tide has turned. It's past whether it's happening or not, and there's some huge opportunity in creative real estate, and you can be part of it. See you soon.