Technique No. 40 Selling of Second Trust Notes

If a buyer cannot supply the seller with a large enough cash down payment, he can give the seller a note – fully secured by the property – with a face value just large enough to yield the required cash proceeds when sold to an investor in the marketplace. Of course, the buyer has to make payments on the note according to the terms agreed upon, no matter who holds the note. Alternately, the buyer can give the seller a note secured by another property in the buyer’s portfolio. The same process of selling the note at a discount can be used to generate the cash needed by the seller. By moving the mortgage, however, the buyer has the advantage of fully leveraging other assets that may have already been encumbered beyond the threshold tolerated by commercial lenders. He also can now “crank” funds out of the newly acquired property more readily since it is left with less secondary financing or none at all.

Here’s how it worked recently in a Phoenix transaction: The buyer of a $65,000 SFH gave the seller two notes for his equity, one of which was sold by the seller at a discount to raise the needed down payment cash. The other note remained as a third with a single-payment balloon after three years.

9. PARTNERS

The ninth area of flexibility in creative finances is the use of partners for those who rationalize their investment inactivity on the basis of having no money, no credit, no financial statement, no equity, etc., Robert Allen has the following response: “If you don’t have it, someone else does.” The strategy is to make that someone your partner if you cannot bring the deal off any other legitimate way. Assuming that the buyer has exhausted all other areas of flexibility, there are many quid pro quo arrangements he might use involving a partner. Five of them are covered in this section.

Technique No. 41 Borrow Partner’s Financial Statement

Many investors without strong financial statements feel they must approach sellers with fear and trembling. Not necessarily. If the deal requires partnership support in this area, a successful investor will add to his team the strength he needs and go into the marketplace with confidence.