After Tax Cash Flow In Real Estate Finance Finance The New Real Estate Bubble

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The New Real Estate Bubble

The economy may not be good for some people. why Because they are in a position to profit from rising prices today. Discounts higher than today’s value since the 1980s have not been so good. For some it is even better.

Think about it. Low interest rates. High sales motivation. fewer buyers. low price. Government discount. tax incentives. You couldn’t ask for a better environment to make a lot of money fast. This is a negative bubble that will not last forever. Negative news lowers prices and increases profits. I’m taking advantage of it and so should you!

If real estate is so great, why are people running away from it? Just out of fear. They don’t know what’s going on. They listen to the news and it’s all bad. They don’t watch headlines to see opportunities. Have you ever heard that fortune makes opponents? These brave souls are the ones who look at the fundamentals of the economy and then find business sectors with higher than average losses and buy big.

Consider Warren Buffett. He has made a fortune doing this. They know they will prosper when the economy recovers because that sector will recover faster and more than the rest of the economy.

So what am I doing in this economy? Well, I have 33 years of real estate experience. I have bought, sold and held commercial, apartment, single-family and land. Here are some points I follow:

1) I believe holdings are the key to long-term wealth.

2) Residential real estate is great because it is the least risky of all real estate. After all, everyone needs a shell. Oh… it’s home.

So now you know what to buy to prosper in this economy (and all others forever). Next, you need to know where to buy, what to buy, how much to pay, and where to get the money to do it.

These are key questions that concern any business. You may think you know these answers. But for most investors there is a duplicable plan that solves all the problems, guides you through the process and delivers profits.

First, let’s look at where to shop. I believe most people can build a business in your own backyard. That means there are at least two neighbors within a 5 mile radius of your home that have good moderately priced homes. Average price for your market. It is important because it will generate cash flow.

Second, the question of what to buy is what I call our street smart business plan. Beautiful homes in beautiful neighborhoods that beautiful people with beautiful checkbooks want to own. Ultimately my exit plan is to sell homes to clients who live there. More on that later.

Third, how much to pay. This is where skills come from. You can fix it up with all the foreclosure investors and buy it on the courthouse steps, but that’s a very risky place to start and requires all that cash. Instead, I look for other ways to find deals that allow me to shop at a discount and control the process. I can evaluate the property, condition, closing time and even financing. The skills and tools I’ve developed for that process give me the flexibility I need to turn a profit.

Fourth where to get money. Welcome to my program “The Seller IS the Bank”. With proper training you will find that salespeople will be your allies in the process. By knowing the right words to say, they will allow you to collect payments on their loan. Not only that, but they will refund the seller’s financing for the difference. I would never be able to do this if I focused on foreclosure purchases or short sale deals on the courthouse steps.

Of course you need a plan to make this happen more often. It should include specific education, skills training and proper documentation to build your profit centers and defenses. This is a key business strategy that many investors miss. They wing it and hope for the best and fail miserably.

For a property to sell in this economy, you need to have a plan for that as well. The next step in my master plan is to make the most money with the least amount of effort with a paycheck for years to come.

We offer our properties on a Rent to Own program. We give customers up to three years to buy, rent credit for on-time payments and then even finance if they choose to do it for us. Friends, there is a huge market of people who would love to own a home. They are poor, bad or have no credit. They will pay you for the right to build their credit. Some people call them tenants. Yes, people who rent are the same people who consider owning a home someday if they get the chance.

Just imagine all the problems this would solve. Tenants (we call them customers) think it’s their home and treat that home and you completely differently. Not only that, but they pay you first so they can get their rental credit toward the purchase.

Here is an example of a real deal. My Street Smart training clients regularly do similar deals.

A woman had inherited a house. She used to live there. She had a brother and he bought his share a few years ago with a loan worth 50% and paid him off.

Now she was having cash flow problems because her job had reduced her hours. She couldn’t pay the mortgage, and worse, it cost her money every time she moved the house – taxes, insurance, new roof, new water heater, new privacy fence, etc. So she was thinking of selling and moving into an apartment. Without the maintenance headache.

She knew the property was worth at least $160,000. She was ready to make concessions to get rid of it quickly. Using my salesperson’s philosophy of the bank and the right words to make her feel at ease that she was making the right decision, here’s the deal she accepted:

1) $130,000 purchase price financed as follows:

2) 75,300 existing loans with monthly payments of $454.24 (5.5% interest rate)

3) 45,000 at $300 per month till maturity (zero interest)

4) 8,000 cash down from which she paid all closing costs.

You should compare it to conventional loans to fully understand why this is a good deal. Since this is an investor property, interest rates are generally higher than a primary residence. If you can get a loan, let’s say it’s a 7%, 30-year fixed rate. Now in today’s market, an $8000 drop would not be acceptable to a lender. They want to see at least 20% down. This means you will need to bring down $26,000 in cash (minimum) on the investment property.

Not only that, but you’ll pay loan points and loan closing costs of about 3%… or $3,660 in cash. So with the traditional way most investors buy you would tie up $29,660 CASH and make payments of $691.92 over the next 30 years, for a total of $249,272.42.

Thanks to my “Seller is the Bank” program I was able to pay off her loan of $300 a month PRINCIPAL with just zero interest. That loan is paid off in 150 payments or 12.5 years, with payments starting 3 months after we purchase. The loan we have taken is to last for 26 years. This means a total cost of my funds of $197,448.32 or a savings of $81,484.41. Not only that, I don’t need any credit because the seller is a bank and their property is collateral for the loan. Plus, there are no cash savings and closing costs. Wow! Lots of numbers but read this again. Same deal, two different offers. Do you like this plan better?

By the way, any typical investor is eager to get a $160,000 house for $130,000, even if they have to go to the bank to get the money. Hence the cost of fund savings is on top compared to the equity earned.

With the right strategy and offers I was able to make as much profit from that one deal as many investors make in 6 to 8 deals.

Now let’s look at the exit strategy. I sold it on my “Work for Equity” program where I give my buyer credit for their down payment if they do the painting and fixing. So I had no more cash to spend.

They put down $15,000 and agreed to pay $1,300 a month in rent. They agreed to a purchase price of $169,900. This is an initial cash flow of $546 per month that will increase with inflation and increase again when my $300 per month loan is paid off in 12.5 years. And of course I recovered all my cash expenses and pocketed cash too.

So now you can see multiple profit centers when shopping:

1) Zero credit problem. I didn’t have to use my credit to qualify for the loan

2) No bank financing

3) No loan origination fee

4) There are no loan closing costs

5) No 30 year loan

6) No loan eligibility delay

7) Short term cost of funds

8) Low down payment (many times no down payment and in some cases the seller pays us to buy)

9) Greater profit opportunity if the seller later chooses to sell their seller financing note at a discount

10) Beautiful house, beautiful neighborhood that beautiful people with beautiful checkbooks want.

Now let’s take a look at the profit centers when selling:

1) Cash from your buyer (more than security deposit)

2) No refunds. You don’t have to pay back the down payment (option fee) versus the security deposit

3) No fix. The customer is entitled to the property in an “as is” condition as possible, saving you delays and repair costs

4) The cash flow as rental income is hundreds of dollars more per month than the payment to the seller or their bank.

5) No out of pocket expenses. You use the tenant’s rent payments to make the down payment and the underlying financing

6) Less stress. You have a happy client who you gave a real chance

7) Increase in business. You get referrals to new potential clients that allow you to build a list of buyers

8) Low repair costs. You have a homeowner in training who takes on minor maintenance and repairs

9) Low collection concerns. You have a client who has a financial and life improvement incentive to pay on time

10) You have the best of both worlds. If they buy it… YES!! You sell at your price and they pay the closing costs. If they don’t buy… YES!! You get the property back and do it all over again. Either way you win.

It all fits perfectly with my business philosophy… when we buy we help people, when we sell we help people. We are problem solvers and dream granters.

There you have it. Instead of being in the real estate business, I teach you to be in the finance business. We use easy to learn skills to get creative financing from the seller when we buy, then offer creative financing to our buyer when we sell, making a big markup in between.

I hope you enjoyed this look at how to thrive in today’s economy. This business model has worked for me through all the financial ups and downs. This negative bubble occurs at a time when low interest rates, market anxiety, a high supply of housing and willing sellers can make you richer than ever.

Over the past 25 years I have developed a complete process with all the tools, training, technology and team coaching and mentoring to share this method with others. This process works and has led many to become millionaires in no time because they were wise enough to realize that adopting someone else’s already perfect process is smarter than trying to create their own. I now have users and devotees of this system in all 50 states and 15 foreign countries. You too can build a long-term business that is highly profitable for you and your family. Read this again and see if it is right for you.

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