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Amortizing vs. Interest-Only Loans, How to Invest in Today’s Uncertain Times, Notes and Real Estate

virtual coffee q&a

It was that time of the month again… this morning we enjoyed another great mastermind call. We dove right into our monthly Virtual Coffee Q&A: Anything Owner Financing & Notes, and started off with a couple of Hot Seat participants who wanted help with various aspects of note and real estate investing. See the complete summary writeup and hear audio recordings HERE, or subscribe to our Owner Financing & Note Investing Podcast on iTunes.

This year I’ve been doing some direct marketing for real estate in Carson City, and yesterday I met with a motivated seller who had been here for the last 8 years taking care of her mother (who has since passed) and she wanted to sell her inherited house quickly and effortlessly so she could enjoy the rest of her life in beautiful San Diego, CA.

My first job was to determine exactly what was most important to her regarding the sale of her property… price? speed? ease? cash flow for retirement? someone who will carry on a legacy they’ve created? In my experience, sellers (who don’t want to hire a real estate professional) usually fall in one of the following categories:

  • They need all cash and yesterday, they don’t want to (or can’t) spend any time or money fixing it up, and they don’t want to work with a Realtor- these seller will usually take a cash price of 65-75% of ARV (after repair value)
  • They want all cash but it’s not urgent so they are open to a joint venture where I come in and rehab the property and handle the real estate agent, making it completely hands off for them, then we split the additional equity that was created. I picked this idea up from David Ray. If we net $200,000 from a retail sale because of my repairs and upgrades, and the ‘as is’ cash price was $155,000, then my efforts created $45,000 of additional equity, which we would split 50/50. I would get $22,500 (maybe I would spend $10,000 doing the rehab, making a $12,500 profit). Seller would get $155,000 + $22,500 = $177,500… a much better cash price by being willing to work with me and wait a little bit.
  • They need cash flow for retirement. Most sellers don’t even know this option exists until they are presented with how the numbers would work out. Many times they discover that it’s much better for them to carry paper, maximizing the price they can get for the house, and also growing their money at 4-5 times what the bank would give them. Once they realize how much they can make by being willing to ‘be the bank’ on their property, then it’s not hard to create a win-win owner carry scenario.

I’m not sure yet which way the seller will go, but even if we don’t end up working together on the sale of her property, she will definitely be looking me up to get some of her funds invested in notes. She has lost so much wealth over the last few years that she has been terrified to put any money back out there… stock brokers, market makers and fraudulent companies stripped a lot of money away from her and her family.

She’s pretty scrappy with what she’s got left, but absolutely fell in love with my business model and wants to be involved as an investor.

Fortunately, that’s not an uncommon thing. People are scrambling for what to do, how to position themselves for growth and profits amidst the chaos and uncertainty we are experiencing these days.

It’s my pleasure and privilege to work with a lot of financial friends who are just regular people needing to preserve principal, make enough to retire on, and wanting to feel good about what their investment dollars are helping to support in communities across America. We need to work together, one Mom n’ Pop to another, to create the solutions we need… so quit sending your money off to Washington and Wall Street! 😉

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