Navigating the Shift: Leveraging Creative Real Estate financial Deals

Okay. So what I'm gonna do is just share my screen and just give a couple, a little bit of overview of our community and how everyone can get connected to all the great things that we're doing here. So for those who are new, could you put in the chat box that you're new? This is your first event, your first time interacting with our community or with us. I'd love to see who's new here because I just wanna give you a very warm welcome. Hey, Um, Yasmin. Hey, Rachel. Um, awesome. Jennifer, Regina, you're new. Great, great. Welcome to everyone here. So I wanna just share, and thanks so much for being here. Great to meet you, Amanda, Miranda. Very cool. It's just wonderful to see all of you here today and, uh, being part of our community. So a little bit about our community and how you can stay connected and how you can get involved in various things that we're doing. Um, so our Facebook group is probably how most of you heard. About this event. We have a Facebook group of almost 15,000 women where it's a very safe place for women to ask questions, get the support they need. And it's just a one— something was right away when we started our community, we, we launched our Facebook group. We have meetups across the country. We have, I think, 3 or 4 now in Canada as well. And so these are just local groups for women to come together on a monthly basis to, again, listen to a speaker, mastermind together, do some networking together, and really get that local supportive group of women together. So check those out. Those are on our website. If we don't have a location, you could apply to be a meetup leader. We also have an eXp team, and this is for women real estate agents who are, who are looking to grow their obviously agent business, but they're also looking to invest in real estate. It always stagger me. I'm speaking to a, um, uh, for a women, uh, realtor conference, uh, in, in, in 2 weeks. And it, it's staggering to me how many women realtors do not invest in real estate. And I think it's a shame because they're actually poised to be some of the best, uh, investors. Uh, so we're very passionate about that too. Um, please stay tuned on all of our free webinars. We do these twice a month. We have a, um, I'm so excited to have Jenny on today's webinar. We have a, uh, doctor, um, next Tuesday. Put it on your calendar if you don't have it. It's 1 PM. I'm gonna be at BPCon. If you're gonna be at BPCon, put, I'll be at BPCon in the chat box, but I'm speaking at BPCon. Andresa Guidelli is speaking there too. So we'll be there running around. But, um, while I'm there, I'm conducting a webinar on health and the, and the, and for especially women's health. Uh, and, and, uh, so it's gonna be just a, an amazing, um, webinar next Tuesday, put that, uh, oh cool, we've got some people gonna be here from BPCon. Hey Trina, please come up to me and say hello. Um, very cool. All right. And then we have InvestHerCon in June, June 2nd through 4th, Austin, Texas. If you don't have your ticket, what are you waiting for? We're gonna have, uh, we had 500 women last year. We had 30 companies, uh, 35 companies there. And it was such a, um, really special, meaningful 2 and a half days. a really deep relationship building, content, and community. So hope you can be there. And then the last thing I wanted to mention here, we have, um, we have our Strive Mentorship Program. This is specifically for women who've done 5 to 10 deals and are growing and looking to scale. Uh, it's very specific. It's application only. And, um, what we have, I wanted to share with you, and that's the QR code. Fatima here, uh, it's a picture of her. Uh, she's one of our, um, coaches. She's such a phenomenal human being as well. And she is, um, open to giving complimentary strategic calls, uh, you know, for free to basically assess where women are at and to kind of help, help you get you where you wanna go and figure out what the gap is. And she does these complimentary, no strings attached. You don't have to sign up for anything after. It's just a, a way to give back to the women scaling their portfolios to give them some ideas and some strategy. So definitely take advantage of that. She is phenomenal. And, but it's specifically for women who've done 5 to 10 deals. So without further ado here, I'm going to stop talking, something I love to do, but I'm going to stop talking and give the floor over to Jenny. You know, I'm excited to have you on here. It's if you don't pay for good counsel and that's why I love real estate attorneys, you will have to pay in different ways. And I heard that once when I started 17 years ago, I started investing. And I was like, ah, and I'm a cheap person, right? So I never really, you know, paid for any— anything, uh, because you're just cheap and, you know, you just want to get the best deal. But, um, Jenny, I appreciate you being on. I appreciate what you do for our, our industry. Um, I can't tell you how valuable our attorneys are and how valuable real estate attorneys are to, you know, keep, keep you on the straight and narrow, making sure you're making the right calls and decisions and paperwork and strategy. So I know that's not the topic for today, but I just wanted to say that that's really important to have a good team. And so I just wanted to mention that as we jump into today's topic and you could take the floor.

All right. Well, Liz, thank you so much for having me. I'm really glad to have found your community, InvestHer. I actually became a real estate attorney and started doing probate as well because of my passion for real estate and real estate investing. So I've been investing in real estate myself for for about 15 years. So a lot of the things I talk about is not just based upon my own experience, of course, but also learning from hundreds and hundreds of different clients. And what I love about real estate is how diverse and how multifaceted it is. So some investors that I've worked with that only focus on certain strategies, I get to learn a lot from them. And then there's others that focus on other strategies. So I'm glad to have that knowledge based upon all my experience working with other investors. I started my title company and became more like what's called an investor-friendly title company so that I could have the opportunity to work with investors of all different paths. And today's topic, what we're going to be talking about, which I don't know, like I did, I have a PowerPoint, but like, I, you know, which I like, you know, I want this to be like an open forum. So I don't know if you prefer like more like a question and answer, or you want me to kind of summarize my PowerPoint, kind of go through the different creative financing strategies and then open it up for questions?

Exactly. I think, I think that would be great. Just so, so content could be, you know, it's always helpful to see it. So if you want to go through and teach and share your content from your PowerPoint, when you're done, what we'll do is I'll pop back on because the point of why this is live, and Jenny is, this is not AI, right? We're not, we're not making believe we're people. We're, we're really here with you live. The point of that is to really field questions in real time and, and really get those questions answered for you so you can move the needle, right? It's all about our mission is to empower women, right? To live a financially free and balanced life. So we wanna make sure your questions get answered. So if you can present and then I'll come back on and field questions. Andresa Guidelli: If I can just request for everyone, because we— I love our community because it's so active and it's so engaged. It's one of my favorite things about the community that all of us have built over the last 5 years. So I don't want people to put questions in the chat because there's gonna be like, hi from Milwaukee, and then there's a question right below it. It's confusing. So please put it in the Q&A box. If I can request that from everyone, just put it right in the Q&A box, and we'll field the questions when I pop back on and we'll make it very, um, dynamic and, and I'll ask you questions and we can chat a little bit. I'm sure I'll have some questions knowing the women that are listening to both the recording and live. So, and I'll just, uh, and I'll stop, uh, I'll mute myself here. Do you, are you able to share your screen?

Yes. Let me go ahead and do that right now.

Yeah.

So, so let me know if you can see it right now. Yeah. Let me go to a mode that's more— yeah, let's see the slideshow mode. Just bear with me one second. No problem.

So, so as I was saying, if you can please put your questions in the Q&A box and I'll pop back on and make sure we field those when you're, when you're done. By minimum, if you can, if you could be, you know, about 20 of the hour because we kind of like to— we like to start on time, like to end on time. These are busy, busy women, you know, kind of making a lot of things happen.

We got to go make that money. Invest.

Got to go make that money, right? We can't be learning. Can't be taking webinars all day. But this is important. But then we're going to take action afterwards. So, okay.

All right. So let's get started. Again, my name is Jenny Barshin. I'm a probate and real estate attorney, also a real estate investor. Very, very passionate about real estate and women in real estate. So Really excited to be here with you all today. What I really noticed, I think that's very cool, is that we have women from all different parts of the country, and that's very exciting. And, you know, I love, you know, investing in different parts of the country as well. What I want to make sure everybody knows today is that real estate can be very state-specific. So I'm going to try to be as general as possible. But when you're talking about any of these creative types of means of investing, it's really important to know that, you know, You have to make sure you know the specific rules in your state that you're investing in. And if you're investing in multiple states, then I suggest to talk to attorneys in different states, um, because you want to always be compliant with the laws of that state. Now, some of these things that we're going to talk about is federal law. So federal law means that it applies to every state, um, which kind of makes our lives easier, um, because then we don't have to see what the different state laws are. But Just keep in mind that, you know, always find an attorney to work with. Like, for example, I'm a Florida licensed attorney, but, you know, if you're investing in California, Indiana, keep in mind that you should also consult with an attorney in your state to see how you can be compliant with the things that we're talking about today. Okay, so what are creative deals? Creative deals just means a non-traditional means to purchase, finance, or sell property. And I'm just going to touch upon a couple in this webinar. But, you know, there's other methods out there too. But, you know, these are some of the main methods. And that's why I would like to delve into them deeper with you today. So when we talk about creative deals, we can— that includes seller financing, or sometimes called owner financing, properties acquired subject to a mortgage, mortgage assumptions. And I'm going to explain the difference between those because sometimes people get mixed up, they think if a property is subject— if you're buying it subject to, you're assuming the mortgage, and it's actually two different concepts. We're going to discuss lease-to-own, lease with options to purchase, and I'll touch upon private hard money in a little bit of detail, as well as short sales, because they are also considered non-traditional ways of purchasing property. So when it comes to owner financing, we have what's— or seller financing, The concept is basically the seller becomes the lender, okay? So they're selling the property, but they are going to be, you know, giving some of the money or become the lender for you to be able to finance the property. So instead of going to a third party, to a bank, to a private lender, you're going to be relying on the seller to give you that loan. So in Florida, or in a lot of states, we have what's called a mortgage, and that's the security on the loan. In other states like California, it's a deed of trust. So if you Google, if you're not sure which, what state you're in that you're investing, just Google it like, you know, is Alabama a deed of trust or a mortgage state? And what, you know, what matters there is because it's the way that the loan is treated. So with a mortgage, it's a lien on the property and the seller is completely, you know, out of the title. They're no longer the owner, but they have that mortgage lien on the property. And then the lien in Florida, or a lot of states, you have to foreclose if you want to get the property back, like if the borrower stops paying. In a deed of trust state, it's set up differently. You have a trustee, and that trustee is a third party that's involved, and it's not the same as like an actual collateral lien. It's considered a different way of structuring it, but at the end of the day, The bottom line is they are both a lien on the property. They are both collateralizing the property somehow. It's just the terminology and the process and foreclosure and all that is different. But getting back to seller financing, so we either have the seller could be holding a first mortgage or a first deed of trust, or they could be second position. So sometimes people will combine strategies, like they might have the seller, let's say got a loan from Wells Fargo, 3% interest, fantastic. They're willing to sell it to you subject to that mortgage, meaning that they're willing to have you become the owner, but you continue to pay Wells Fargo. That loan's not being paid off at closing. You're going to take the property subject to the mortgage. But the seller might also be willing to give you some money for the down payment part. So they could say, okay, I'm selling you the property at $200,000. My loan with Wells Fargo is $150,000. And let's say you only want to come out of pocket $10,000. So the seller gives you that second mortgage or second deed of trust for that $40,000 difference. So, you know, there's different ways you can actually combine these various strategies, just like how the example I just gave you. The borrower signs a loan package at closing. And then we have to consider the important loan terms, like what's the interest rate? Is it interest only or is it amortized where you're paying principal and interest every month? What's the maturity date? What's insurance? What's prepayment penalties? I can tell you, ladies, with a lot of different investors I work with, they are, you know, if you become skilled with negotiating, sometimes you can get a 0% interest rate. You know, sometimes you can, you there's no interest whatsoever. Sometimes the seller might be willing to even defer any payment of principal until the time that comes that you, you know, maybe do the renovations to the property and you go to resell. So there's a lot of, you know, flexible ways that this could be structured, and it really just comes down to a matter of negotiation. Some of the documents you'll see: the mortgage, which is the collateral on the property, the lien, or deed of trust if you're in a deed of trust state. The promissory note, this is just my promise to pay you back. Assignment of rents and leases is a document that says if you default, the lender can get the rent money applied towards the mortgage payments. Loan agreement has certain stipulations about, you know, what you can and can't do. Insurance, you typically, just like when you get a regular loan, you're going to have to get property insurance and make sure that the seller is named as the additional interest. And then there's some other, you know, legal type of documents that they're not coercing you to get insurance, or they also might want a UCC, which is a lien on the personal property in the home. So as part of like making the seller feel comfortable with this kind of arrangement, you have to let them know that, hey, you know, like, I work with this attorney, we're going to put together this loan package that's going to make sure that your lien is secured, your loan, and that God forbid something was going to happen, which it won't, because I'm, you know, a good borrower, I will pay your— make the payments timely every month. But just in case, you know, you have this additional security, and drafted by an attorney, and you give them this assurance, and a lot of sellers will be a lot more comfortable with doing this type of arrangement with you. Now, I won't get into all the nitty-gritty details of the Dodd-Frank Act, but it's something just to keep in the back of your minds that there is a federal statute. So this is— this applies to all states, and it's called the Dodd-Frank Act. And it basically says that a person who gives a loan is considered to be a mortgage loan originator and they have to be licensed when it comes to residential, except if certain exceptions apply, right? So we don't want a seller to be fine, you know, get a loan origination license, like a mortgage broker license, to be able to give you a loan because that's not their business. So as long as we keep the loan within certain parameters, we're going to be okay and the seller is going to be able to give us that loan and they don't have to get a mortgage broker license. So the first exception is that, again, this is only for residential loans. So we're not talking about loans that are like to corps, LLCs, but it's residential loans. And basically the seller can do the loan as long as they're a natural person. They only do it for one property in a 12-month period. They own the property, which is typically given, and they weren't the developer that actually developed the property, that constructed it. Now, the financing has to come with a repayment schedule that doesn't result in negative amortization. There's certain rules. Balloon payments are allowed, but not less than 5 years. The financing has to have a fixed rate. So we basically have to stay in these Dodd-Frank parameters when we put together the loan package. Now, if they do it more regularly, they're limited to only 3 properties in a 12-month period, but then they have additional requirements for the loan. So if it's a seller who wants to do a couple of properties, maybe they have 2 or 3 and they're willing to just do seller financing with you on a few of them at the same time. Just make sure that we again have to comply with the Dodd-Frank Act and structure in a way that, that is compliant. And then in the— with the 3 exception rule, they do have to get some proof of ability to repay the loan. So whether it be tax returns or whatever it is, it's important that they obtain that. And then if the Dodd-Frank— if none of those exceptions apply where the seller can do the loan, So sometimes you can do seller-financed loans and just run it through another person who's a licensed mortgage loan broker. And I've done that before. And, you know, they make sure the compliant part is covered, the compliancy part, because there's harsh penalties for violations. So that's why we want to stay compliant. You can have penalties up to $4,000 to $5,000 a day for violating Dodd-Frank. But it's not a difficult hurdle to cross. It's just that we have to make sure to stay within the parameters. And we do that all the time and are able to make the loan packages compliant for Dodd-Frank. So how do we pitch a seller? Like, what's the pros for the seller? Why would they do this? It definitely attracts more buyers. Sometimes you have sellers who just really, they're looking to get closer to market. They're not as motivated, like where they need the cash and they need to close within, you know, 15 days and all that. But, you know, they're willing to give the seller financing. Well, that opens up a lot more pool of buyers and it definitely makes things attractive, especially if you can get them to a rate that makes sense. You know, like right now conventional is what, 8%? But if we can get them to do 4%, 5%, and I do see this all the time and again, I see you know, some of my clients negotiating 0%. It definitely attracts more buyers and it's a pretty attractive option. The higher sales price I just mentioned. Tax breaks. So this is big for sellers. A lot of times they're in a situation where if they sell and they get all the cash upfront in one lump sum, they're going to be paying Uncle Sam a pretty hefty tax bill. And, you know, they don't want that. Who wants that, right? I, you know, Corporate tax return filings are next week and it's not a fun time. So it is. So basically the seller will instead agree to— because they're getting installment payments, they're not getting everything, all the proceeds from the sale in one big chunk. They will get a tax break because of that and they don't have to pay this huge income tax bill. So that's a great way to sell sellers on this is, you know, especially if they've held the property for a long time and they have a big chunk of equity in the property. And, you know, sometimes it's, you know, depending on your tax rate, it could be up to 40% of the— that you're going to have to pay for taxes. And so to avoid that, you know, doing a seller finance arrangement could be really beneficial for them. Monthly income. Some of the sellers you might deal with, they don't have, you know, a source of other sources of income. They might already be retired or they might be just, you know, not in a position where they're getting regular monthly income. And then this way you're offering that to them, you know, here you go, like, we'll structure it in a way where I'm paying you $500 or $1,000 a month, and that gives you that kind of income. Other pros, like if it's principal and interest loan, a lot of times interest is front-loaded, so they're getting a good chunk of interest up front. They get to sell as-is because you're going to be, you know, handling all the repairs. They don't have to take care of those repairs before closing where they would if they had to deal with an FHA or a conventional lender. They could sell the note to another person or investor eventually if they don't want to have to deal with it. You could structure this in a way with a leaseback option for them so they could, you know, give you the seller financing, you become the owner of the property. And if you want, if that's something you're willing to do, you could give them an option to lease back. And because it's just a more, you know, it's an attractive type of financing, it does open up the pool of buyers too. So you're able to sell faster. Some of the cons, you know, they might not want to keep track of all the payments and kind of what we call service the loan. So in that case, there are third-party companies. If you look online, you could find some that can handle the payment collection for them. You know, they might be worried about buyer defaulting. What happens if you default and stop making the payments? So if you, you know, like as I said, how each state's laws are very specific to the state, well, you can explain to them, well, you know, there's a foreclosure process and once you go through that, which won't happen because I'm always going to make my payments on time, but you have that lien on the property. That's what makes you feel secure. This is not an unsecured loan. This is a secured loan. And that mortgage or that deed of trust is what secures it. Seller financing could be a little bit trickier if there's an existing mortgage. But as I mentioned, you could possibly do a subject to with that situation. And, you know, if they want to assess buyer's ability to pay, we could work around that. You could maybe show them some kind of bank statements, a tax return, something to give them a little bit of comfort, some pay stubs. To show that you're able to make the monthly payments, or if you're planning to rent it, show them some of the rental comps and give them that, you know, comfort that the rental income is going to be more than enough to cover the payment. Tax obligations, risk of property damage. So these are things that kind of keep in the back of your head because when you approach sellers like these, there might be some of the objections they give you for seller financing. But again, for the tax obligation, you could tell them if you get the installment payments, it's a lot less tax obligation than if you have to pay this huge bill right up front to Uncle Sam. If you pay— if you could get all the money up front with property damage, assure them that you're going to have sufficient insurance in place with repair costs. You know, just given that assurance that anything that happens with the property, you're going to be maintaining it, you're going to be taking care of it. And basically that's some of the objections you might get. But, you know, keep it in mind and then keep your workarounds to those objections like I mentioned. Pros. So what are some of the benefits for us? So possible lower interest rates, or as I mentioned, not any interest rates at all. Saving on loan-related fees. For any of you ladies who've ever gotten a conventional loan, we know it could get really expensive. With appraisal fees, processing fees, underwriting fees. You know, they have so many different names for the fees that they can tack on. So keep that in mind that, you know, you save a lot of those fees when you do seller financing. A lot quicker closing, usually because you're not going through this whole approval process. You could be, you know, close within a matter of maybe 2 weeks, possibly less. Flexible down payments and good alternative for people who just can't get normal financing. They can't qualify for conventional financing. Just keep in mind, if the seller does want a down payment, higher down payment, how to work around, like maybe you have to, you know, pull money from a line of credit or pool some money together. If you don't have that down payment, try to get them though to a point that you're comfortable with. Like, you know, the example where maybe you give $10,000 down and they're refinancing, you know, 90%. Balloon payments, just see if they like, if it is an arrangement that they want the whole sum due after 5 years or 10 years, that you have a plan in place for that. Because some sellers don't want to give you a 30-year loan. They just want like after 5 years or 10 years, you pay them off. And that's what the balloon payment comes in. And if it's a large payment due at the end, just have a plan in place that you're going to refinance out or sell the property when that time comes close. Okay, so let's talk about subject-to transactions. So with a subject-to transaction, you are not satisfying the mortgage at closing or the deed of trust. You're taking the property subject to it. So sometimes sellers are in default, sometimes they're not. So there are situations where they're just really struggling to make their payment, but they're, you know, they still have been paying on time. It's just come to a point for them that it's just not feasible anymore to continue that. And then that's when they're like, okay, I'm willing to sell to you. And you take over my mortgage, you continue to pay, and you become the new title owner as well. The seller is just, you know, is completely removed off title. You must— there's when we structure these, there's definitely some addendum agreements that have to be signed so that the parties are both involved on both sides of what are, you know, what's this arrangement that we're getting into? Because in a sense, you're partnering with the seller. They're not out of the picture when you become the owner of the property. You're continuing to make their payments. So they still have some kind of, you know, interest in making sure that, you know, you are making your payments on time. We definitely want to get a third-party authorization. You want to get online access to the loan portal so that you can check when the payments go through, all that. And then you can still get title insurance, which is really important to get for all your purchases, with the ones that are long-term at least. And you can have the title insurance placed, but the seller's mortgage is going to be an exception. So your subject-to agreement that's signed at closing, it should cover certain terms such as insurance. Who's going to pay? Is the buyer going to be taking over that? Making sure you're added as an additional insured to the seller's policy. So the way with insurance, the seller has to stay on the insurance because the loan is still in their name, but you want to be added as an additional insured. And if that's not allowed, you want to get your own insurance policy in place just in case anything happens where repairs need to be, you know, you need to make an insurance claim. We mentioned in the agreement that repairs and maintenance, the buyer's responsible. We talk about the seller has to always give that continuing authority. So if that power of attorney, the one day the lender says, oh, it's expired, or third-party authorization, whatever they want to call it, You still, you know, they're going to cooperate with you to make sure you always have access. Repayment terms, which, you know, what's the deadline for you to pay the loan back? When is the seller— when is the mortgage going to be paid? Because that loan might have 25 years left on it, right? But the seller might not want you to be taking that loan subject to for 25 years. So you might have an arrangement with the seller that within 5 years, I'm going to either refinance and pay this loan off in full, or I'm going to sell the property and then pay it off in full at that time. What if you default? What if you stop making those monthly payments? So here we have two options that I've incorporated before into subject-to agreements. One, the attorney can hold a deed in escrow, meaning that even though at closing, the seller deeded the property to you, you became the new owner, you sign a deed back to the seller, but that deed is held in escrow, meaning it's not recorded, it's just held in a safe place at the attorney's office. And should you miss 2 payments or 3 payments or anything along those lines, then the attorney can record the deed and the seller can go back to being the owner And sometimes sellers, that gives them a lot of reassurance because they're nervous when they make this kind of arrangement. Like, how do I know that you're going to continue to make my monthly mortgage payments? And, you know, if you stop and impacts my credit, the loan can still be foreclosed on. So to give them that insurance, sometimes we do the deed in escrow or the better option for the investor if they agree is that within a certain time period, you'll deed it back to them. So we can have a clause in the agreement that says, if I, Jenny, stop making my payments on your loan for 2 months, at that time, I will sign a deed back to you so that you can become the owner of the property. Now, that's a better option for the investor. The deed in escrow is a better option for the seller. It's a matter of negotiation. Try to just negotiate where you, you just promise or agree that you'll deed it back if you stop making payments in a certain time period. And then there's a big old due-on-sale clause. So most mortgages or, you know, other documents that secure property might have a clause in them that says that a loan is accelerated or it becomes due if you change the title of the property. Basically, if you change the ownership of the property, without paying the loan off in full, we can call the entire loan due or accelerate it. So ways to mitigate: always pay on time. You know, usually the best way is just set up autopay. And, you know, at the end of the day, most lenders, if they see they're getting their money every single month on time, they don't really, you know, even look much to see the titling and all that. You could include in the subject-to agreement that the buyer has to refinance or sell if the lender calls the loan due. Another way is, which I've done before as well, is forming a trust or land trust. Not all states have land trusts, so you have to check with your state if they offer that, but some states they do. And you can have the trust where you become the trustee, like, so you manage the trust. Seller is the beneficiary of— I'm sorry, you become the beneficiary of the trust. So the seller's, you know, not really involved in the trust, but you can have the trust still, like it could be called the 123 Main Street Trust or the Sally Smith Trust, you know, the Sally Smith being the seller, and just put it in a trust. And then the lender, a lot of lenders are not going to check to see, oh, you know, who's really the beneficiary of that trust or what's going on with that trust. They still see it called the Sally Smith Trust and they just assume Sally Smith continues to be the owner of the trust, which does not violate the due-on-sale clause. But, you know, there's these strategies, some— they're not all foolproof. You know, there's like, you have to be a little bit like the way you structure it. You're not— it's not like it's guaranteed, but it's— it definitely mitigates the risk. And in all my years of experience, I've only seen one time where a client of mine had the due-on-sale clause called even though they were making the payments every month on time. And it was a small-time lender. It wasn't any, any one of the bigger lenders. And then he ended up just refinancing and, and paying off the loan at that time. And this is— I'm not going to go into detail, but this is the Garden St. Germain that talks about when you can't exercise the due-on-sale clause. And as you see, one of the options is creating a trust agreement. Okay, so what's the difference between assumption and a subject to? An assumption is actually you are the buyer are taking over their loan and becoming the borrower. So the seller is going to completely be out of the picture. And you are going to be the new borrower. But with those same wonderful terms that the seller got 3%, maybe it was a 30-year loan that has 25 years left on it. The trickier part with assumptions is that you do have to qualify. So you're— it's like basically just like if you were applying for a new loan, except that you're taking over their, their terms, the seller's terms. Because of the fact that not all mortgages are assumable. And, you know, it has all these different barriers that a subject to doesn't. The more common way investors do this is using the subject to method where they just take over the mortgage payments without having to change who the actual borrower is on the loan. But again, if you want to give it a go with assumption and they're willing to, the seller, it's not a bad option because at that point their name will be completely off the loan. And I'm going to— I'm not going to, just for the interest of time, go into too much, but I'm going to hopefully be able to share my presentation with you guys. So Liz, just if that's okay, I'll send it to you. And if you want to just email it to the girls after, to the ladies in the group.

Yeah. Well, the good news is that we actually— everyone's going to get recording of you speaking. Good. So the whole, whole piece of it. So.

Okay, good.

Yeah.

So have the slides. Okay. To be able to go back and because I get— I tend to go into a lot of detail, but which, you know, I want people to have that so that on their own time they can be able to review.

Um, no, absolutely. We got some great questions. So, um, okay, before we, before we do that, Jenny, where could, um— and there's so many, there's so many specifics when it comes to, um, creative financing, right? So, and it does vary by state. So there's a lot here, but I think the key right now, that's why we have this topic on this, today's webinar, because, because You know, the need for creative financing is incredible right now with what's happening in interest rates and all that fun stuff. So we have a bunch of good questions. Let's, if we can jump into these, um, and before we do that, Jenny, where can the ladies on the webinar, folks watching this webinar connect further with you if they have further questions and things?

Um, if you go to, um, on Facebook, Marina Title, that would be my title company. Um, just find me on Facebook at Marina Title. Would be the best way to send questions.

Awesome. Okay. And for them to connect.

And always, ladies, feel free. Like, I know we only have this 1 hour, but, you know, if afterwards you have questions or you just want to pick my brain on one of the subjects we talked about, please feel free to reach out to me. I'd be happy to answer your questions.

That's a big, big deal coming from you. So we appreciate that. All right. So Carolina, Carolina is asking, can the seller be a foreign person or entity?

Yes, they can be. There's restrictions like there's a federal statute which again applies to all states called FIRPTA or the Foreign Investment in Real Property Tax Act. And that's that somebody like they have to— there's some IRS compliance because the IRS wants to make sure when they sell that they file a tax return. So, you know, it's just a matter of some paperwork, but definitely the seller can be a foreign national.

Okay. And then I think this is a follow-up. If so, will they get a FIRPTA break? FIRPTA.

So FIRPTA is what I just mentioned that it depends on how you structure it. So FIRPTA basically says sellers of foreign property are supposed to send 15% of the sale proceeds to the IRS. And that's the gross. So whatever the, let's say like, you know, $300,000 purchase price, 15% is supposed to go to the IRS and then the next year they can file their taxes to get the difference. So there might be sometimes when that FERPTA will apply, but you know, there's ways that we can work around it to make it more manageable for the seller.

And this is a good question for those who are not, if they're not, if you're not using seller financing, it's such a great win-win strategy and saw how you structure it, right? Especially right now, because you got to remember, a lot of the folks that want to sell their property, or could— you can get creative with— their interest rates are definitely not what they are today. They're probably a lot lower. So that's the beautiful part about seller financing. But, uh, Carolina, you're asking a follow-up, and I think this is a good question for everyone. What's a usual repayment term and down payment for seller financing? Is there a general, um, rule of thumb that you've seen?

Oh, it's amazing. Like, every time I try to, you know, configure it, put this in a box, some investor will come, one of my clients, and show me that there is no boxes.

For sure. Right. Yeah, it depends, right? It depends.

It depends. And that's the beautiful part about real estate. You can get as creative as you want with these deals. Like, if you just present it in a way that, hey, I can give you this payment of $500 a month, then maybe they don't even care really what kind of interest rate or, you know, that you're offering them. They just want that $500 a month. It could be even just the return of the principal. And same with down payments. Like, there's a lot of, you know, flexibility where some may want 5% down, some might not want anything down, some sellers might want 20% down. So there's just, you know, a lot of different possibilities there.

There is. And I, I think the other key is, is it's a win-win. So really understanding what's important to them. We just recorded a mini episode. So we have a— for those who don't know, we have a podcast for 5 years. We're published on the BiggerPockets network, and we just recorded a mini episode about even just negotiation. Some people care about terms. Some people care about a lot of different things. You just don't assume it's not just the highest price, right? It's not always the highest price. They may just care about the term, the timeframe, fill in the blank. So don't always assume it's the highest price that everyone cares about right now.

Agree.

You got to seek to understand. Hey, Elizabeth was one of our, one of our STRIVE members. Good to have you on here. She's asking a couple of questions. If you offer to hold the deed in escrow, do you do anything to protect the buyer's down payment? No.

At that point, your down payment is at risk. Just think of it just like if you were getting a normal conventional loan, you know, like once you give that down payment at closing, that's gone. But I mean, gone, meaning that it's been applied towards your purchase price and you're now the owner. But if you default, just like with a normal loan, the deed in escrow becomes the option for the seller to be able to get the property back.

Got it. And then your, your follow-up, I guess, is a follow-up question. Can you clarify insurance with subject to? Are you saying you have seller, you have the seller continue to be the insured or the buyer gets a new policy and keeps the seller as the additionally insured? Additional insured?

So that's a great question. So, so it really, some, it depends. You could do both. So you could have it where the seller always has to have insurance in their name still because the seller's on the loan and the lender will ask you from time to time. They get, they get copies of the insurance policy and if they don't see the seller's name on the loan, they'll start questioning and they'll want that to be changed. So you can take the seller's policy and see if you could be added as an additional insured But that's sometimes, then if something happens in the property, they're going to, it's going to require their cooperation too, right? So you're going to like, maybe you get a check and the seller's also going to have to sign off on it. So what if, you know, the seller's not even home and you don't even know where they are anymore? So some buyers, just to have that additional security or protection, especially for longer-term holds, they'll just get a totally separate insurance policy in their name. But at the same time, again, they're going to have to maintain that seller one because of the loan terms.

Makes sense. Makes sense. That's great. Jennifer, you're asking about subject-to. Everyone wants to know about subject-to. With a subject-to deal, is the interest deductible to the new owner? The statement would still be made out to the original owner.

So I think like, as far as you could work something out with them that they You mean like as if they— if it's an investment, right? Because if it's a personal loan, like, I don't really think you get much benefits, like, of being able to deduct interest. But if it's an investment-type loan, since they're not making the payments anymore, I don't think they would get any kind of like tax benefits on it. And I think that's actually one of the clauses we include in our subject to, that if they were getting some kind of tax break for that, They're not because they're no longer making those payments.

Hmm. Okay. Makes sense. Okay. Anonymous attendee. These creative options sound great. How do we find them?

LOL.

You know. Okay. So yeah.

Yeah, go ahead. Well, my, you know, there's— well, first, just if you're marketing off— well, there's two ways, right? Off market or MLS. Like if you're doing MLS, I might have to come back for a different day to do the lease option because that's a whole— But if you're doing the MLS, I would say to put in keyword search terms like owner financing, seller financing, owner finance, subject to, assumable assumption. If you put in those terms, there will be listings out there that offer that. And then you could set up a search queue, what is it called? A saved search. And then every time a new listing comes up, if one of those words are in the, in the section, like the remarks section, you're going to get an alert. Now, if you're more like where you market to off-market properties, whether it be, you know, foreclosures or you're doing mailers or texting or cold calling or whatever marketing method you use, you know, that's something that you'll have to— when you're talking to the seller, you have to glean that information and see if it's a good fit. Like, you know, do they have that really attractive mortgage right now at 3%, you know, and then to see if they're willing to do something with that. Liz, I would love your input on this, too.

Yeah. You know, I think it's, it's about knowing what your options are. I always say it's like a suitcase and you need to know— not even— let's, let's, let's use a toolbox because we're in real estate. You got your toolbox and your toolbox is like creative financing strategies. And then you find an opportunity, right? Whether it's off market, on market, but you find opportunities, single family, duplex, fourplex, what have you. And you almost wanna know like what tool in that toolbox would be appropriate for this deal and this seller. And that's really, I think, the work to be done, quite honestly. Because it might make sense for a private money op. We, my husband and I grew our business from, you know, a small portfolio to a large, to over 2,000 units over many years. But we really got, we were really focused on working with private lenders and really raising equity, like having active partners in our business and then moving to passive partners in more of a syndication. That was our strategy. And we used those tools because it made sense for the projects we were doing and the assets we were buying. I would say subject to seller. I mean, I wish we had more, but those were our two tools. But if you had seller financing, subject to, you know, working with private lenders and equity partners in your toolbox, the work to be done is to know what those are and when to use them. And so I would say that's the most important work if you're not as comfortable, because then you'll know which tool to take out based on what that seller's saying and what the deal is, is, presenting to you. I would recommend BiggerPockets has some great books. Pace Morby just came out with a book on creative seller financing, subject to. I'm going to be, I'm going to be like, give a shout out to my husband, of course, but he wrote a book. I also wrote it with him called Raising Private Capital that's also published by BiggerPockets. So you want to brace yourself with the knowledge and then know How are deals being done in today's market with these tools? Not 20 years ago, but right now. So I don't know if that lands for some of you, but I think that's the work is like, get clear on those tools and when will you use them?

Yeah. Very good.

Just to use an analogy for real estate. All right, Stephanie, um, you were saying, I was listening to an influencer talk about due-on-close subject-to strategy, and that was the way interest rates are now being are now that our potential lenders have more reason to being called on— let me read this again. I was listening to an influencer talk, okay, about due-on-clause subject-to strategy, okay, and that with the way interest rates are now, okay, that potentially lenders have more of a reason being called, calling them due to get rid of the lower interest rate, okay, for higher ones. Yeah, I mean, that, that makes a lot of sense, right? I mean, I don't know what your perspective is, but you're hedging because basically, and you know subject to probably better than I do, 'cause I haven't done many of those kinds of, I haven't structured a lot of deals with subject to, me personally. But yeah, the fact that the higher interest rates, that's where that strategy works right now. I don't know what else you've seen, Jenny.

Yeah, so for subject to, some weird power issues going on in my building today. For subject to, definitely the lower interest rates that a lot of sellers have versus, you know, like right now 8% or whatever that'll become the norm versus the 3% that a lot of people were getting a few years ago. That's a big part of it as far as, you know, why it's so attractive. And also not having to qualify for the loan, you know, or like even, you know, sometimes hard money lenders, they might have certain stipulations or they might, want the property to be run a certain way. They want to get an appraisal, this and that. Whereas with the subject-to, it's just from, you know, there's really no qualifying. It's just you come to an agreement with the seller and from day one you're just taking over their payments. It makes it a really quick and easy closing too.

Yeah, absolutely.

Okay.

Is it more likely for the loan to be accelerated now since interest rates are so much higher?

I haven't seen it in my experience. Like, again, going back to like, as long— most lenders just, if you're paying, you're making the payments every month on time and you're just, you know, keeping up with your insurance requirements and all that. And they just— that's all they really care about, especially these bigger lenders. It's hard for them to be able to go after each time, you know, title changes. But again, it doesn't mean it can't happen. So that's why it's important to be aware of the risk and then to state clearly in an agreement with the seller, if this were to happen, how are we going to handle it? And then that gives both parties a sense of assurance that, you know, we have a plan in place in case the due-on-sale is triggered.

Okay, cool. Julie wants your contact info. So, okay, someone else, these ladies want your contact info.

All right.

Miranda is asking, does subject to—

Is that okay? I just share it like this too.

Please. Please do. Absolutely. Moran is asking, does subject to affect the seller's ability? Yeah, perfect. Does subject to affect the seller's ability to buy another house? Does it affect their debt-to-income ratio? Good question.

The seller, yes, it might, because the seller, that loan is still on their credit in most cases. So when they do a credit report with a new lender, they're going to see that and they could you know, say, oh, I'm not— I don't make those payments and all that. I don't know if that necessarily will work. Like, hey, I can show you 12 months that somebody else is making these payments on my behalf. Maybe that'll work. But I have seen situations where it doesn't work and then the seller is going to have to figure out a plan or bring more down payments to be able to get that new loan.

Yeah, that makes sense. Corinne, and hopefully I'm saying your name right. I know we were messaging back and forth. How to find sellers who are willing to seller finance? What is the recommended ways to bring this option to a seller? I think that goes back to like my toolkit. If I could just give, give you my two cents toolkit analogy, I think knowing what the goals are, right? If I'm somebody who's willing to do seller financing, the benefit to them, right, is that they're not selling their house in full, full, like a, you know, a normal sale. So they're not subject to what, you know, a tax, you know, being disadvantaged by getting, getting hit with taxes and what have you. So they may just want the cash flow. So think about seller financing as cash flow for them, right? They're basically be making cash flow. So it's just like us, right? Do we want to buy a rental for cash flow? Do we want to do a flip to gain to, to, for, for like maybe a larger paycheck to reinvest into maybe a long-term asset? This is the same thing with when you think of like a, a, a seller, what's important to them is to avoid, you know, a, a big tax you know, burden, if you will. And so that could be an advantage to them depending on their needs. So you have to— I think key, right, is to really get into their mindset of what their pains are, what their challenges are. They may not—

they don't—

may not need that big chunk of money and they don't want it, right? They may need that. They may like, well, I can make, you know, $2,000 cash flow. That would be really, really important for me. Or other people like, I don't want the cash flow. I want the big gain and I don't mind about the taxes. Really depends. And I'm sure there's other advantages, right? But that's a big one that I hear of. And I know that's a good way to think of what their needs are.

Definitely. That's huge. And then just don't make assumptions like you said earlier. Just come to that conversation without any assumptions in place of what the seller wants or what kind of benefits they're seeking. Just really talk to them, listen to them, have that conversation. And get to those pain points and then you'll be able to structure something that's beneficial for them, the win-win, based on that conversation. But if you come in with those assumptions, oh, sellers will of course want 6% interest, 7% interest, so many times that's not the case and you'll be setting yourself up for something that's just not beneficial.

Yeah, you can't go wrong by always figuring out how do you create a win-win and really serving them as much as you're serving yourself. I don't know how else to do this business, 'cause if it's the other way around, it's gonna catch up, right? And I know so many of the women are also really committed, and men, creating a win-win, especially in those kind of creative strategies. Do you handle 1031 exchanges as well?

[Speaker:ANDRESA_GUIDELLI] Yes, yes I do. And 1031s are federal too, so like every state has those. But yeah, I handle them in, You know, those can be any attorney or qualified intermediary. It's called that, the term for the person who runs the 1031. They can handle in any, any state. So it's not state-specific either, which is nice.

Yeah. You want to make sure you go— you really want to make sure you go with a custodian who is well regarded and has a track record. I learned the hard way. Me and my husband learned the very hard way that not all 1031 exchange custodians are created equal. Um, and so long story short, I'll tell you what, what episode it is, but we got money stolen. It's like a mini Bernie Madoff where this person literally stole millions of dollars from people. Um, really, really crazy story. Another day, another time. But, um, they're not created equal. So make sure you go with people that are well established. Just, you learn the hard way sometimes. Um, last question. I think this would be a good place to, to, to stop. Can you do a wrap? I know that that's another strategy, if you will. Also regarding the paperwork as well, what I need title. Can you explain for those on the folks that are still on here for a few minutes what that is? And then you can answer Alexis's and then we'll wrap for the day.

Sure. We'll wrap with the wrap. So we'll wrap with a wrap.

That was all that was bad, man. My jokes are getting bad as the day continues.

Basically, how that works— so let me give you an example. I sometimes find it easier if you give an example, just makes it more concrete. So I have a client who did a wrap recently. So what he did was he bought a property from a seller subject to. So he became the title owner, took over the seller's existing payments, then he wanted to sell that property. So he decided he's going to sell it with the subject to, that mortgage already in place, but he's going to give his own mortgage to the new buyer. And so he took the original mortgage and he wrapped it into a new mortgage. So the original mortgage terms were, let's say, you know, $700 a month payments, 3% interest. But now he, and this is just one way to do a wrap, but he said, I'm going to get 6, 7% interest. Like, I'm going to sell it, but I'm going to get 7 or 8, 9, 10%. I forgot what he charged. And then plus a fee from the buyer, like, you know, I'm going to sell it for more and they're going to give me a down payment. And now I'm going to take that original mortgage and I'm going to wrap it into this new mortgage with new terms. And the seller— the buyer is going to pay me, and then I'm going to make the original seller's mortgage payments. So that's, you know, One way you could wrap a mortgage.

That's great. And that's, you know, that's why you need to have the right people on your team that have been through these deals. Don't talk to people that are like, I heard about this strategy. No, you want to talk to people who've been through the strategy, who've been through it. That's really important, especially with creative deals, because you can, you can make one wrong call and you're— you really, you don't want to be in that position, right? You have to be kind of mindful, especially now. Being conservative and, and, and, and, and making the right calls, mitigating risk. These are just smart, right? Smart investing decisions in any time, but especially right now. But it doesn't mean you should avoid doing creative deals. You just can't do them kind of winging it.

Yeah.

You need people like Jenny on your team that said, I've been here, done that. Here's what I've seen here.

Yeah.

And here are the pros, here are the cons.

Right?

I can't say that enough. That's, everything in this business. Thank you so much, Jenny, for being on today.

No problem, Liz. I would love to come back another time and talk more about lease options because I think that's also another great creative financing tool. So I guess if there's interest out there for that and—

Jenny, you're not getting rid of us, Jenny. You're part of our crew, so you're not going anywhere.

I like being part of the crew. Thank you.

Here's what I would recommend to everybody on the chat. The 61 folks that are still with us really quickly with the 1 minute we have left. Everything that we do and the reason why we have these webinars and we bring on phenomenal people like Jenny is about learning great information, right? But our community is not about great information. You can Google subject to, you can buy a book. You didn't need to come to this webinar. The, the, the purpose of why we exist and what we're really committed to for women is knowing what I know now, what is one action step that I'm going to take? What's one thing I'm gonna do as a result of this hour, literally, that we've been spending with you? And so time is, is, is limited. Like we don't have an unlimited amount of time, you know? And as we get older, we learn that more and more. So I really mean this sincerely, is that I want everyone in that chat box, all 60 of you, I want you to put one action, one action you're inspired to do. Buy a book on subject to, or I don't care what the action is. But it's about moving the needle. And when you learn content and you don't take an action, it's like you've learned the content and, and it's like it goes kind of in the air.

Yeah.

And it goes everywhere. And we don't want that for you. And that's not why we've created this community because we didn't need to create a community to get the content, right? You can get this content other places, but it's the community and the accountability that we really stand for. And I would ask you to be so bold, put the action step in the Facebook group. Tag me, tag Jenny. I'm sure she's gonna get active in our Facebook community. I love that.

Yes, I love that.

Um, and say, this is what I'm doing as a result, and this is the, the steps I'm taking, you know? And I, and I, I, and encourage you to do that. Even better, I'm gonna give you another challenge. If you're gonna be, hopefully all of you are coming to InvestorCon, you're gonna come up to me during InvestorCon next June and go, you know what? That webinar that Jenny taught on this creative deal, I took action, I bought a property using this strategy because of that webinar. Like, I would love to hear that because that means action's being taken. It's not about me or the webinar or Jenny, but it's about you and the actions you're taking. So I just can't say that enough. And, and that's what we really stand on. So I love the actions, uh, being put in the, um, put in the, um, chat box. So keep it up, share it in the Facebook group. That's why I have a community there. We have our meetups. We have a lot surrounding you to make sure you're moving the needle. It's all about moving the needle. And Jenny, thanks again. There's no way you're getting rid of us. You'll be back on for a lot of cool things that we're doing. So we're going to pull you back in. So thank you.

I would definitely appreciate that. And thank you ladies so much for your time. Again, reach out to me, whatever you need or questions you have, I would be happy to answer them and connect with you. And I hope to hear from you guys soon.

Awesome. Great. Have a great rest of everyone's day and take One action. All right. Take care now. Bye.

Take care. Bye.