How To Beat High Interest Rates | Buying Real Estate

In today's video, I'm going to show how to keep buying properties in this rising interest rate environment. Coming up next. The Feds won't stop. Interest rates are still climbing, cooling off the unprecedented price hikes that we saw less than a year ago. Most people are scared of purchasing a property right now through a conventional loan. But what if there's another way? Let's go over it. Are you looking to live the life you've always wanted through real estate? You're in the right place. I'm Joe Holmes, and I made this channel for the new and experienced investor. Make sure that you like, subscribe, and share it with your friends. Let's talk about creative financing. This is something that was really popular back in the 1980s, and it— for me, it's almost like déjà vu because everything that was happening back in the 1980s is happening today. Interest rates are very high. Back in the 1980s, for a normal mortgage, we were paying 14 to 16% for the interest. Property values were a lot lower, obviously, so that's where I put the correlation as to, you know, today's market where the property values are so high. But, you know, here we are in November of 2022. The interest rates are sitting around 7%. The Fed just raised the core interest rates another 0.75%. I'm looking for an interest rate at the end of the day, because they said they're not done, probably to be around 9% or 10%, probably by the first of the year. And I'm hoping that that's not the case. But from what I've seen and what I've heard and what the Fed is doing right now, Don't be surprised if it's at that rate. So what happens when you're— when the interest rates gets up to that point and you need to sell your home? Okay, so there's a couple of ways, and I'm talking about seller financing now. So number one, let's say you're open to seller financing, and to describe seller financing is you're stepping into that role of being a bank. So Let's say there's no loans on the property. Property's worth $800,000. Somebody sends you an offer and they say, we're willing to put $100,000 down, 10%, let's say, but you need to carry back seller financing, which means that you are now going to be the bank. So you're going to negotiate what the interest rate's going to be, you're going to negotiate what the time period is going to be, it's going to be probably amortized over 30 years. But it doesn't mean that you have to have that loan for 30 years. You can negotiate that it's due in 3 years, that it's due in 5, 7, 10, even 30. That's up to the negotiation process between the buyer and you, the seller. But at the end of the day, you're going to be able to sell your home. So you figure out, okay, 10% down, I've got $100,000 in my pocket, and then I'm going to be getting an income every month from this loan that I'm making to this buyer. Okay, again, you charge whatever interest rate you two negotiate. So to sell your home, he's looking— the buyer's looking to get an interest rate of, let's say, 3%. You're thinking more around 7%. Maybe you decide, okay, let's do this at 5%. Okay. You meet halfway, and as long as both of you agree to what the terms are, You're able to sell your house with creative financing. Let's go another step. Let's say you have a loan on your property and you were lucky and you got that loan at 3%. Okay. You might be able to do what's called a subject-to where a buyer would come in. He would take over the responsibility of paying that loan. Remember, that loan continues to be in your name until it's paid off. And then on top of that, you also take back a second on the property. So now the buyer's coming in, he's paying you on your second, and he's taking over the responsibility of paying the first. And you say, okay, well, I'm kind of a little concerned about that because how do I know that he's going to pay the first? There are systems in place that you can set up through escrow companies or third parties that will collect all the money Once they collect all the money, they're going to send you your portion, they're going to pay off the bank's portion, they're going to pay property taxes, HOA insurance, all that stuff's going to be taken care of by either an escrow company or the third party. That makes you feel a lot better because you know if you get your money every month that everything else is being paid off, and then you know the minute that you don't get your money, there's a concern. The concern is that for some reason they're not paying you, whatever. Your recourse is literally to foreclose on that home and take the property back. Now remember, what do you have? You have $100,000 that they put towards the purchase of this property sitting in your pocket. So if they stop paying and you foreclose on this property, you're getting your property back And you're able to do the same thing all over again except you're $100,000 richer. Okay, the other thing you can do as a seller, you can do what's called a novation agreement. A novation agreement basically says that you keep it in your name, and let's say you have some repairs and stuff to do in the house, you can have the buyer or some organization, company, construction, whatever, come in Fix up the house, okay? And then at the end of the day, sell that house, and then you split the profit from whatever it is that you negotiated up front, okay? So in the case of the $900,000 house, let's say you end up selling it or negotiating, you want to sell it to this buyer for $900,000 on an Ovation Agreement, and then You go in and they, and they do $50,000 rehab, and then at the end of the day, that buyer, you, the seller, because you still own it, you sell it for $1.1 million. So you made $150,000 more than just selling it in the condition that it was in. So you take that $150,000 and you split it in half between you and the buyer. Okay. So that's just a way for you to sell your home at a more expensive price Without having to actually do the rehab. Let's talk about how to find these deals. We have a wholesale team that is literally just cold calling people, just asking them, are you interested in selling your house? They're taught that if somebody's interested in selling their house and they just can't reach that number that's still going to be profitable for the company, that they ask them if they want to do seller financing. Okay, and this way we can put a package together that we can pay them more money, but they're going to finance the deal for us, which means we don't have to go out to a hard money lender and get money to purchase this property. Most of the time, you know, that's going to cost you a couple of points. You know, on a $900,000 house, that's $18,000, and then interest rate You may as well add another $10,000 to $20,000 on there. So you're close to $38,000, $40,000 if you get a money partner where you can pay that owner a little bit more, maybe let's say $30,000 or $40,000, the whole thing, and be able to finance that property so that you go and rehab it and sell it, you know, 4 or 5 months later. When most people are scared to purchase properties, savvy investors see an opportunity to help sellers and add to their portfolio. Creative financing is going to become a very handy tool in the upcoming year. If you want to see a case study of a couple of seller financing deals that I've done, click on this video right here. If you want some more one-on-one help, make sure that you book some time with me. All my info is just down below. I'm always here to help.