From The Mind Of A Transaction Engineer | Owner Structured Finance Success

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Hey real dildos this is charles parham a scientist with your question of the day what is an owner structured finance deal hey this is charles larry mad scientist and the question is what is an owner structured finance deal now i’m going to break this down based on an actual case study from one of my mastermind students that we helped structure for this actual deal

Now first of all what is an owner structured finance deal it’s a deal where either part or all of the equity position and there also could be no equity where the owner is willing to structure the deal to allow payments to be made it’s the word owners structured finance deal now let’s look at this case study here this is an actual property in montgomery county true

Deal and this deal we have what we call the front side of the deal and on the front side of the deal the selleck is getting a total of three hundred and thirty five thousand dollars that’s what the actual offer price is and the seller has agreed on that now based on that offer price we’re giving to sell it a $100 deposit keep it – hope you’re keeping up now now with

That hundred dollar deposit the seller is going to get ninety nine thousand dollars at closing so remember the deal is being structured because this product this particular property is free and clear so the seller is getting a three hundred thirty five thousand dollars total and they’re getting in the way of an earnest deposit of $100 and at closing meaning when we

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Go to closing on this purchase money know the actual seller is going to get ninety nine thousand dollars so that’s mean at closing they’re gonna have a total of ninety nine thousand one hundred dollars so that leaves that we have remember the balance the actual purchase price is three hundred and thirty five thousand so here’s the terms of the owners structured

Finance part the instructor details is this the seller will receive fifteen hundred dollars a month for two years that’s 24 months of $1,500 which leaves a remaining of 199,000 to be paid in the form of a balloon payment which means at the end of month 24 going into month by the end of month 25 an additional 199 has to be paid now let’s look at the total numbers

Because this is what makes it interesting the after repair value on this deal is totally 450,000 so at this point we’re going to be all in at approximately around 415 well how do we get all in at 415 because the repair cost is so a lot of you guys will see a deal where the numbers are this tight and they say if you’re all in it for 15 and the rv is 450 how can i

Make money on this deal and that’s where on the structured finance come into play and that’s why i when you structured it where we gave the seller money payments each month for 24 months and a balloon payment by month 25 now we finish all the deal to finish all the numbers and here’s what it looks like once we fix this property up we’ll sell it the after repair

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Value of this property is 450 now on the reason for the beauty of the structured part is we don’t have to pay the owner they’re a part of the funds until two years later think about this the difference here is we’re talking about a total of about two hundred and fifty thousand dollars and then the owner is gonna get their dollar amount for the next 24 months and

They’re going to get the one hundred and ninety nine thousand dollars at the balloon so when we go to closing and four to six months when we fix the property up and sell it we’re going to put a total of two hundred and fifty thousand dollars in the pocket and essence we’re getting what’s called a zero interest loan from the seller of two hundred and fifty thousand

Dollars that we don’t have to pay back until month twenty five two years later that my friend is what you call being a transaction engineer and that’s the basics of an actual owner structure finance deal this is charlie the mad scientist signing out and i’ll see you on the next question of the day video bye

Transcribed from video
From The Mind Of A Transaction Engineer | Owner Structured Finance Success By Charles Blair