Owner Financing Overview

Owner Financing Overview

Unfortunately i have to cancel this evening’s meeting i truly apologize but if anyone knows raeford road it’s a huge mess they’ve actually blocked the road in front of our venue so for you new to rayford row i don’t want to have you come out and frustrate you because you can’t find the police i want to reschedule the meeting actually we’re doing this meeting

Every second wednesday so we’re going to continue the conversation and i say continue because i’m going to talk a little bit i want to go briefly into the subject of investor financing i’m sorry owner financing seller financing and then we’ll continue the conversation next next month second wednesday in the month and david murphy a real estate attorney is going

To elaborate on the on the legalities and keeping owner financing completely legal so you can structure this type of deal and not worry about you know getting sued and things of that nature so i want to say continuing the conversation because i’m going to touch a little bit about what we were going to talk about this evening first off let’s talk about why owner

Financing is going to be pretty big in the market to come one-third of all homes in the united states are owned outright by their owners and believe it or not when the market starts to slow down which right now it’s not slowing down it’s on the hyper speed in fact let’s let’s touch bases on what’s happening in the market right now so in texas but i mean all over

The country we’re seeing a market that is as far as sales prices the highest that’s ever been even higher than the 2007 market and the reason being is because they’re not as many homes on the market there’s a slight housing shortage in the lower price ranges so causing prices to go up now the question i want to ask you is do you see this continuing and then how

Long because we’ve been at this high price peak market for gosh maybe maybe five years now in fact this business cycle as long as i’ve ever seen and i’ve been through two business cycles and my real estate career i’ve been in the business for almost twenty years now what i mean by a business cycle is the definition of a business cycle is a cyclical expansion and

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Contraction that we see about once a decade or so and what we typically think of as basic economic fluctuations now the business cycle usually lasts between five and eight years this business cycle is the longest in history so when you think about business cycle you’re thinking about the economy getting strong and then the economy hitting weak when i saw this

Chart originally cycle was about hunting in 30 months this was about six months ago so this cycle is over eleven years historically long this was the one previous which was one hundred and twenty eight months okay and in that cycle we saw economic growth right and then we saw prices get to a point that were unstable then the recession hit and everything slowed

Down now notice i want you to notice one thing that in most cycles when you have high prices they lower they increase the rates to kind of slow down spending and increase savings but in this cycle where right now there are decreasing dangeous rates okay let me give you another chart this is the same kind of cycle except it kind of describes what happens during a

Cycle around when you’re going into the peak which i believe that we are we were at the peak of the cycle there’s a lot of new construction and there’s declining vacancies right so if you ever tried to find a rental in this market it’s very tough also again these multiple offers on properties in the lower price ranges and in the upper price ranges you’re seeing

A slowdown now here’s the thing in the second phase of the cycle on this chart you can see that there will be increasing vacancies but new construction will still be happening because properties already bought the money’s already been borrow so the builders are going to continue to put homes on the market even though its decline which gives you huge opportunity

As an investor all right not only are you going to see new construction on the market that’s not selling but people are going to be selling and then they’re gonna have trouble finding buyers and no most of them won’t even be distressed because people are self for very for different reasons right so they’ll sell for because they’re going through a divorce or their

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Sell because they are moving jobs or you know starting a new job and they’re moving out of the city and some people just inherit property they don’t want so so that is going to become a huge opportunity in the market to come in this market you’re starting to see is very hard to flip property because prices are so high it’s hard to purchase property low and then so

High it’s easy to sell it it’s just harder to find those opportunities it’s harder to wholesale in this market because the prices are so high so i think that actually i know because i’ve been through this cycle before and you don’t want to get caught off guard when the cycle changes and that’s what i want to discuss what can you do when the cycle changes to take

Advantage of the opportunities and one of those opportunities is going to be owner financing wraparound mortgages and land trust’s okay when we’re talking about owner financing let me break that down and again we’re gonna continue this conversation next month second wednesday at the hot spot all right for road and i want to just break it down what seller finance

The owner financing is okay so you have the seller a barbie seller a is selling the property for two hundred thousand to buy or b but in this situation buyer be is not going to get financing through a lender or buyer b is gonna do and again this is a negotiable everything what i’m talking about but what buyer be is gonna do is they’re gonna put 10% down and pay

A 5% interest rate these numbers aren’t accurate i didn’t even do the payments by 5% and they calculated this i just did this on the fly but i want you want to give you an example so so seller b is agreeing i’m sorry buyer b is agreeing to purchase a property for the seller a for 200,000 ago put 10% down and they’re gonna make this payment now buy or b owns this

Property they’re paying the seller back let’s say over 30 years it’s just simple as that no lenders involved as long as you make your payments every month the the seller is gonna be happy okay you can refinance the seller off you can get a new mortgage you can do whatever you want that’s your property you can rent the property out at this point you might want to

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Rent the property off for $1,500 almost $69 month you can do that and that’s just typical buy and hold okay the benefits of renting the property out you’re gonna have appreciation right you may have some write-offs you’re gonna get cash flow okay but the second option that you can do and this is why we’re gonna have an attorney come out to discuss how you do this

Legally okay you can sell this property to another buyer okay we’re gonna call this buyer c right so you can sell this property to buy our c for two hundred and twenty thousand dollars okay you can collect 20% down you can charge a higher interest rate seven percent you know hopefully this this payment is not gonna be thirteen hundred hopefully this payment let’s

Say this pain was gonna be like sixteen hundred on for months or even seventeen of them again i just do this together quickly so i didn’t do the calculation but the concept is you now owner financed it you owner fine you’ve got you took the owner financing from seller a and then you own a financed it to buyer c okay and again we’re gonna continue this conversation

Next month but i wanted to give you something because you know we canceled the last second so i wanted to give you guys something to to think about the concept of strategy of how to take advantage in a market desk declining because there’s not gonna be any wholesaling in the declining market there’s not going to be any flipping in a declining market believe there’s

Just going to be buying and holding and creative financing and this is a creative financing strategy that you’re going to be able to use next month second wednesday we’re also going to have a cpa come out and talk about opportunity zones tax free a way of operative of taking profits from a deal and investing it into opportunities own and not paying capital gains

Tax that’s another topic we’re going to talk about second wednesday at the hot spot thank you for joining my investor networking group i look forward to seeing you if you guys have any questions please give me a call to 8 1 9 6 9 3 8 1 7

Transcribed from video
Owner Financing Overview By Marcus Bruno