Unlocking Creative Financing: Empowering Your Real Estate Endeavors

Welcome to another weekly Q&A. As always, these come from the community, and whenever I think it's more of a generic, hey, let's try to help others out because we're big about free, we're big about putting these on YouTube, I want to make sure I get it out to you guys. This particular one comes up all the time, and the question is really revolving around, can you guys do terms, deals, creative real estate, creative financing on homes that need work because you always talk about not putting money down or not fixing up a property. Yes, I say yes, yes, yes. We don't put money down typically, not gobs of it, and we don't fix up typically, right? There's exceptions to everything for disclosure here. What you're going to hear now is literally a live call, High 6 call, weekly call where myself and Brian O'Neill coach the highest level, High 6, There's actually a level above that that's invite only, but as far as the public levels of associate, you'll see we're doing a call and the question comes up about can we do deals when there's work needed? Now, in addition to that, we talk about in this particular Q&A on the mastermind call, we talk about what we call the vernacular is AO, assign out. Now, I define that in my book, Real Estate on Your Terms, and I define it in the QLS home study course, so it's all there, but just so you understand what that AO word letter acronym means when you see this. And I'd strongly suggest you get through the deal structure videos on our YouTube channel, Smart Real Estate Coach, because there are so many variations of how deals can go. There are so many variations and nuances and challenges, frankly, that we expose. Nothing's all roses. And so I want you to understand all the different ways to do this. One of the things that keeps me in the business is deals change constantly. The other thing that keeps me in the business, and I'll say this for all of you guys that are out there trying to figure out, okay, what niche should I participate in? Or what niche should I really turn up the heat or pour gas on? It's creative real estate, guys. Fractured closings are way up right now, meaning conventional closings falling apart at the closing table. And there's really— I don't think— I'm not an economist, and the billionaires don't know, so I don't pretend to know. But what I will say is there's really no end to what I'm seeing for the demand on creative real estate, because the sellers and the buyers right now, more time than, than it's been in my 32 years, need your guidance if you're the expert in creative real estate. You can become the creative real estate expert not just by hanging out in our community. I love that, but this is not about a sales pitch. What, what you can do is you can get certified by the Creative Financing Real Estate Association. Go to cfrea.org, and you do that by going through our home study course and completing the test, the little quiz at the end of each one. That puts you head and shoulders above anyone else talking. Not that the competition is strong for creative. It's not. We don't run into a lot of people. There's rehab and wholesalers and flippers, but We don't run into a lot, but if you do, your first question is, oh, did the other investor tell you they were certified? And if you're an associate, did the other investor tell you they were accredited by the Creative Financing Real Estate Association? Powerful tool. So enjoy this chat about can we take properties under agreement and install our tenant buys if they need work? Enjoy.

My last take-in and buyer that we approved here just a few weeks ago was this Same type of situation, Robert. It was a complete rehab. Like, it was— it's not livable. Like, it's completely gutted. But the guy had solid motivation. Um, he inherited the property. He was— and it was from his mother, and he didn't want to make— he was making 2 mortgage payments and he couldn't handle it anymore. And I just used the AO script. I said, just give me 90 days. Give me a chance to see if I can find somebody, find the diamond in the rough that's out there. There's somebody out there that can do this. And this is a perfect property for them. And I found them in less than 90 days. They're taking on everything and they know it right from the get-go.

Great icing on the cake because he did the deal.

Yeah. Yeah. Good job. Honestly, I just used it towards the buyers as if you find that right person that not only can do the work but sees the value in it, I told them, I said, you're walking into instant equity. This thing is priced so low that You're walking into a gold mine.

Question, Tony. I'm assuming your buyer was the handyman or they knew people. Which one?

The buyer is the handyman. Yeah.

So they, they give sweat equity and they got retail value pop right there.

Yep.

Awesome.

Love it. Did you convert that to sub-2 yet?

Working at it. I had the conversation with him and, uh, I just basically told him, I said, we're gonna buy this. We're gonna take it over right away. You're no longer gonna have to make payments. We'll get everything taken care of in the background. And, uh, we're good to go. I said, you just gotta get the power hooked up.

Oh, so this is the one you're trying to convert from an AO all the way to a sub-2. That's a big jump. That's cool.

Yeah, because, um, the conversation with the buyer is a couple, couple of different reasons. Is that he's a contractor, he's a contractor by trade, and he, he does things under the table. And they're, they're using the wife's, um, income because she's a W-2 in the school systems And I just planted the seed at the buyer's meeting. I said, there's a really good possibility that down the road we can do this entire thing without utilizing the banks. And we can— we'll owner finance you if we get to a certain place with the deposits over the next few years and we get to a percentage that I feel comfortable doing it. There's a good possibility that that's there. So I planted that seed with them. So it's a pretty ideal situation.

So everybody gets that. If you have questions, please yell. AO to sub-2 potentially. And then once he gets to sub-2, potentially owner finance the buyer. Now he's got his 3 paydays just grew. He went from 1 to 3 to growing 3. It's great.

I like the comment there because I did that recently. I planted that seed and I regretted it because the guy like, yeah, you know, sometimes we're able to do that because he was really looking for a land contract. I said, yeah, sometimes, you know, we're not— there's no definite on this house. You know, I've made it clear. It's like, we don't know for sure, but maybe. And like all that, he was just fixated on that. And then Like, I don't know. And then it was just geared toward everything was like, if we're not doing this, then I don't, you know, I'm not sure if I can do it. When I was fixated on it, it was—

When did you say it though? Because there's a difference between when Tony said it. When did you say it?

Yeah, way too early. Like, I was like, unless— I don't remember exactly when, but we can't— before the buyer meeting even.

Yeah, it can't be said to the buyer's meeting when they came to the buyer's meeting thinking they're doing rent-to-own and they have to deal with the bank.

Right.

That's when you drop the seed at the earliest.

Right.

You can drop it 6 months later once they're in the house. More preferable, by the way. So there's your lesson. You knew that, sounds like. Okay.

Yeah.

Super.

I'm curious on these little rehab, how do you end up pricing those? Like they say, we know it needs $20,000 of work. Do you just like Do your normal pricing and then reduce it $20,000 and say you're getting that.

At least you try to get more, but rehab is going to be 70% of that. So you got— when you— okay, 2 answers. Yes, on the buyer side in your head, but on the, on the buy side with your seller, you're going to negotiate like a rehabber would, right?

Yeah, I was thinking, I was thinking on the buyer side, like how you market that, you know?

Yeah, I think it's gonna leave $20 grand on the table for him or more. If you like Tony's guy, Whatever that number he left on the table, that retail was, was probably all of that. And then the guy gets to do it himself.

My seller told me, he's like, all I need you to do is get the balance of my mortgage and cover my mortgage payment and I'm good. You take whatever you want.

It's awesome. Um, you just gotta make sure, guys, one, one caveat, make sure you do it, make sure everything's permitted or you have a mess potentially. Even a rehabber, they got to pull up the right permits, which they're going to need you to do that if it's in your name. That's— you don't want them messing around with it. Then if they default, you got a house that is all screwed up, no permits. That's the only thing I'd add to that.

Okay. What does that look like?

They're going to go in as the builder, as a rehabber, to pull a permit for whatever they're going to do to the house. with the town building department, but they're gonna need your signature as owner of record. And I'll go further with those— with these sort of sweat equity work programs. I would put right in your agreement with them on the rent-to-own roughly what they plan on doing and roughly when, because remember, you sold it to them at a discount. You don't want them to live there and do nothing. You're gonna have a mess if they leave. So Okay, here's what we're agreeing to. You're going to do these things roughly by these dates and you're going to make sure they're permitted. It's like an addendum to the buyer agreement. A meeting of the minds, Tony, basically. Okay, you know you're getting into this, you know you're taking this on, it's written here. When do you think you have it done roughly?

Okay.

Got it.

Yeah, I'm glad that came up. That's good.

I just timestamped that.

So Chris, that's basically to ensure that they're doing it up to code. Yeah, yeah. Well, I've had both, right? I've had great builders who put on decks, and this guy who put the septic in, like, amazing, perfect, right to the T, had calls for the permit. I've also gone by the house and said, what the Christ is that that they just put on the house? And I knew nothing about— like, you can go opposite ends. So now we're very strict with the buyer's agreements. Nick's just brain dead. Tell us why. You guys hear when he comments about buyers, he's just There's no gray area because you can get run over.