The 4 Creative Finance Strategies That Close 99% of Deals

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0:00 Creative finance is not just one
0:02 strategy, and so many marketers try to
0:04 brand the one thing that will save you.
0:07 There are so many different ways, but
0:08 many of them are very, very simple. I'm
0:10 going to list the best ones, the safest
0:12 ones that you can use, and a couple that
0:15 you should probably avoid. First, let's
0:17 start with the obvious, seller
0:19 financing. By the way, welcome back to
0:21 the channel. My name is Christian
0:22 Osgood. I'm your channel host. I have
0:23 hundreds of rentals. The first 17 deals,
0:26 17 I did with Creative Finance. Today, I
0:29 still continue to use creative finance
0:31 to close so many deals and negotiate
0:33 deals that many other people could not
0:36 do because they don't have the basic
0:39 tools in their arsenal. They only try to
0:41 knock everything out conventionally. I
0:43 have fun playing both sides of the fence
0:44 today. I've bought enough real estate
0:46 and moved far enough through my career
0:47 where conventional or creative, we can
0:49 still use our creativity to to close
0:52 anything. Here's my top picks for
0:54 creative finance structures, how they
0:56 work, and how you can apply this to your
0:57 portfolio. First of all, let's start
0:59 with seller financing. Very simple. The
1:01 seller is the bank. It is the exact same
1:05 thing. Instead of the bank giving you a
1:07 loan, the seller, if they have high
1:09 equity in the property, which means they
1:10 don't owe a lot of money on it, they can
1:12 lend on anything they own. So, if you
1:16 have a million-doll property, the
1:17 seller's paid off this million-doll
1:19 property. You're purchasing it for a
1:21 million dollars. They simply say,
1:22 "Awesome. Pay me in payments over time."
1:25 And often there's going to be a balloon.
1:27 Here's what I love about seller
1:28 financing. You choose the price, the
1:31 terms, the balloon length, so when the
1:33 note is due, the interest rate, and you
1:35 can negotiate any special clause you
1:37 want. In fact, I'll list a couple of
1:39 them at the end of this video that I
1:40 absolutely love. But we go through this
1:43 very, very simple, my favorite piece.
1:46 You're automatically approved because
1:47 you negotiate all the financing upfront.
1:50 So, there's no approval process, credit
1:52 checks, none of it. when you sign the
1:54 purchase and sale agreement, that money
1:56 is already lined up. Now, if there's a
1:58 down payment, you can either have it or
1:59 you can get creative on the equity side
2:01 as well, but for a majority of your
2:03 money on seller financing, oftent times,
2:06 if you negotiate these, right, you can
2:08 get these no to low money down. Now,
2:10 let's talk about the cousin
2:13 to seller financing. We call this the
2:14 land contract. Now, it's easiest, if
2:17 you've never heard of this before, to
2:18 picture it like buying a car from a
2:21 dealership. The bank holds the title of
2:24 the car on a sales contract until that
2:26 contract is completed. At the completion
2:29 of your contract, they then give you
2:31 title to the car. This is very much how
2:33 a land contract works or also known as
2:36 contract for deed. It is a sales
2:39 contract. In most states, both the
2:42 seller and the buyer, you show up on
2:46 title. One has legal title, which is the
2:48 seller of the property. You have
2:50 equitable title. That means you have the
2:52 rights to all of the rental income, the
2:54 future value, all of the economic value
2:57 is yours. You have the exclusive right
2:59 on this contract to purchase and
3:02 complete the transaction. You are the
3:05 owner of the property on contract for
3:07 deed. However, you have not removed them
3:10 completely for from title. Now, this
3:12 opens up a few pieces of creativity on
3:15 how you can actually do the title work
3:16 or take on additional debt. But the main
3:20 use for contract for deed on the
3:22 seller's end is it is easier for them to
3:24 take back the property should you fail
3:26 on a sales contract in contract for deed
3:29 than if you had defaulted on a loan. The
3:31 foreclosure process is non-judicial. It
3:33 is traditionally less struggle for an
3:36 owner to take back the property if you
3:38 have a failed transaction from a buyer
3:41 to you on a land contract. Land
3:44 contracts also open up a third play
3:47 which many have marketed as a strategy
3:49 in and of itself but really it's just a
3:51 clause on a land contract that we call
3:52 subject to or abbreviated some call sub
3:56 to. So what is subject to? Subject to is
3:59 subject to the existing debt. So you buy
4:02 on a land contract, a sales contract
4:05 subject to their existing debt. What
4:06 does this mean? This means the seller
4:08 continues to pay their mortgage to their
4:10 bank under their name. They do not
4:13 inform the bank that they have
4:15 transferred the property. You now pay
4:18 them their mortgage amount, often more
4:20 than their mortgage amount. They make
4:21 the delta and they cover their expenses.
4:24 Now, you can set this up all sorts of
4:25 different ways so that you are paying
4:27 their mortgage. You can make sure that
4:29 is paid every month. But at the end of
4:30 the day, this is a strategy I would stay
4:32 away from if at all possible. Why? If
4:36 you're building your financial freedom
4:39 on these type of notes where the bank is
4:41 not informed as traded hands, you are
4:43 rolling the dice, the bank finds out and
4:45 they call the note due. Almost every
4:48 single note from a bank has what's
4:50 called a do on sale clause. You are
4:53 flirting with danger if you buy an
4:55 entire portfolio based on subject to
4:57 properties. Can you do it? Yes. Are
5:00 there other ways out? Yes, you can
5:01 refinance. You can sell. But you don't
5:04 want to be in that position. I have seen
5:06 people who bought massive portfolios
5:09 subject to and they got 20 30% of their
5:11 portfolio called. It is not that hard
5:13 for the bank to audit. In fact, I used
5:15 to work for the CoStar group. There are
5:17 searches that I could run on CoStar,
5:19 which most banks have, that says, "Hey,
5:21 show me properties that have had
5:23 significance changes to title over the
5:26 past x amount of years." You can
5:28 literally plug in your portfolio as a
5:30 bank. You can save all the addresses. I
5:32 can get alerts if there are title
5:34 changes. And if I see a title change, I
5:35 go, "Wait a second. Person showing up
5:37 here isn't on our bank note, we should
5:39 investigate this." And voila, they get
5:41 called. Now, this doesn't usually happen
5:43 when you have decreasing interest rates
5:44 because bank has a higher interest rate.
5:46 No, why would they want to call that?
5:48 They're making great money. But in our
5:50 current environment where we saw rates
5:51 go from 3 4% all the way up to the eight
5:55 today, I think we're sitting at like
5:56 6.5.
5:58 If I have a note sitting out there at 3%
6:00 and I'm the bank and I find out, wait a
6:02 second, we can call this money back and
6:04 we can replace that at 6.5%. It now
6:07 makes a heck of a lot of business sense
6:08 to start calling properties due. And
6:10 we've seen a huge uptick over the last
6:12 few years for exactly this reason.
6:14 Subject 2 is a piece of creative
6:16 finance. It is a clause on your land
6:18 contract. However, subject to the
6:20 existing debt is a dangerous game. When
6:23 would I use subject two? One, if it's
6:26 subject to a seller finance note that
6:27 doesn't have a do on sale clause, no due
6:29 on sale, no problem. Perfectly
6:32 transferable. Or if you have enough cash
6:36 to go ahead and pay off that note. I
6:38 actually have a $70,000 sub 2 note that
6:41 was part of a portfolio sale. I bought
6:44 $4.5 million of properties. One of those
6:47 properties had a $70,000 note. I have in
6:51 my contract if that note gets called,
6:53 the seller has to pay it off. If they
6:55 don't do that, I still maintain in the
6:58 operating account of that company
7:00 $70,000. So that my financial freedom is
7:03 in no way dependent on a subject to
7:07 note. If you have these time bombs in
7:10 your portfolio, I recommend you find a
7:12 way to sell or refinance your way out.
7:14 Underrated piece of creative finance
7:16 that has its place in your portfolio if
7:18 used right. Private capital. People
7:20 don't realize how custom they are. I
7:23 have actually used private capital to
7:25 buy one of the best deals I ever did in
7:27 my life. An RV park in Washington State.
7:29 One of the only deals I've ever sold.
7:31 I'm not a fan of selling real estate,
7:32 but we made a ton of money doing it. I
7:35 bought a RV park for 300,000. It needed
7:38 a new clubhouse with laundry machine and
7:41 it needed a new septic system. Not just
7:43 a new septic system, a full new drain
7:45 field. We're talking digging out all of
7:47 the septic about $150,000 project. I
7:51 loan was private money at a ludicrously
7:53 high rate of 13.5% interest. I bought it
7:57 for $300,000 purchase price. They gave
7:59 me 200% loan to value. I got paid
8:02 $300,000 to buy it. That 300 went back
8:05 to the property. We then went ahead and
8:08 refinanced it. My new loan was at
8:10 $74,000,
8:12 which means I got to cash out $104,000
8:15 on a $0 investment that had a holding
8:18 cost of 13.5%.
8:22 That holding budget was part of the
8:25 capital raise. We didn't spend all 300
8:27 on the property. We spent about 250.
8:29 When I refinanced, I got paid 104 back
8:32 on my $0 investment. We later sold it
8:36 for $1.1 million, meaning I made an
8:39 additional $400,000 on top of the
8:42 $100,000 I already cashed out of the
8:44 property. A half million on a $0
8:47 investment in less than a year and a
8:49 half. If you look up the average income
8:50 of a lot of high paid jobs, many people
8:53 don't make that in a year. And we did it
8:54 on one transaction. Now, I average six
8:58 to eight transactions per year. So if
9:00 you think about that, if you just do
9:02 this on occasion and it's the right deal
9:05 for this, and we're talking high value
9:07 ad and excellent price, private capital
9:10 can be a bridge into another type of
9:12 financing. Could be conventional, could
9:14 be seller finance, could be a land
9:16 contract. There's actually multiple ways
9:17 you can structure this. I've actually
9:19 done bridge debt and then got a loan
9:20 from the seller, which is crazy. It's
9:22 called a seller refinance.
9:25 There's so many different ways you can
9:26 structure these though. But the big ones
9:28 that you need to know, seller financing,
9:30 land contract, no to avoid subject to or
9:32 use it correctly, private capital. If
9:36 you just know those, you can start
9:38 knocking out so many deals. And there's
9:39 so many other types of creative finance.
9:42 But those are the big ones. If you were
9:44 to start there, you could close 99% of
9:47 the deals in front of you. I give you
9:48 one more freebie that will unlock all
9:50 these for you. If you're getting stuck
9:52 on creative finance deals where it's
9:53 seller finance, the sellers are asking
9:55 for these huge down payments, 50% down,
9:57 relationships are going to take you the
9:58 rest of the way. If they want a lot of
10:00 money down because they don't trust you,
10:02 get to know owners, get to know brokers,
10:05 build your brand, build relationships
10:07 with people. If you focus on the
10:08 relationship before the deal, all these
10:11 opportunities become infinitely easier.
10:13 If you want to learn more about creative
10:14 finance or how to execute this or just
10:15 join a community of thousands of people
10:17 doing the same thing, I got a gift for
10:19 you. Click the free link below to our
10:21 school community. We have calculators
10:23 there, community, regional leads,
10:25 conversations, creative finance deals
10:28 that are literally posted there. There
10:29 is deal flow. There's community people
10:32 who you can ask questions for and
10:33 connect for in your own market and
10:35 markets all around the country. Join the
10:38 conversation there. It's free. It's on
10:40 school s
10:41 multifamily strategy community. Would
10:44 love to see you there. I'm active on it
10:46 every single day. I hope you are too.
10:48 That's a free resource that I want to
10:50 give to you so we can bring more people
10:51 into the creative finance community.
10:53 Again, I'm Christian, your channel host.
10:55 I'll see you on the next episode. Like,
10:57 subscribe. Adios.