Baltimore Investor Looking to Crush It

[Julie Hassett]

Hello BP Nation! I've been lurking for a long while now without introducing myself. But seeing as how s#*t is finally getting real, it seems like a good time to do so.

I recently moved into Baltimore City proper last month and here's what I'm looking to do:

Short-term:

• Househack my home (AirBnb and/or roommate)
• Long-Term Rentals (BRRR and or Lease-to-Own)

Mid-to-long-term:

• Rehabs
• Blockwide flipping with a team of investors
• Become a master of creative financing (Remove the word BANK from my vocab!)

I'm hitting the local REIA meeting and CAZA meetings here in the city and I look forward to the road ahead.

Connect with me!

- Julie

[Account Closed]

Julie - wishing you luck on "Crushing The Baltimore Market" I have been here for 74 years and have had my number of Crushes - but please understand I have left some deals for you to Crush.

As for being a Master of Creative Financing - you'd have to really get started now - because I need to say with all modesty - that I am the local (if not national) MASTER OF CREATIVE FINANCING - but that's OK, I may be able to give you some suggestions.

As for REIA's we own the oldest one in Maryland - our meeting will be the first Tuesday of every month - hope you can visit us at that time -

I like your enthusiasm about this business - that is how I was went I started doing real estate deals 48 years ago - I am still at it and loving it.

I am developing what will be a 11,000 s.f. night club in Baltimore on N. Charles Street (at 21st), drive by take a look -

I do have to agree with you about banks - I really don't like them that much - I do like seller financing much better. The best seller financing you can create is a principal mortgage, that is a mortgage without interest that is fully assumable without qualification. 

Here are some formulas and creative ideas that may help you when on your exciting adventure in Baltimore:

Wash and Wear - This is a straight forward way of acquiring title without cash, a “give and take.”

This is a method that forms a template for all assumption and “subject to techniques”. Try to make this financing method fit where ever you can. The most common variation on this theme is an assumption in which the buyer takes the property and any existing notes “subject to” and executes a subordinate note for the seller’s equity. A very straight forward way of acquiring title without cash. A simple give and take. The seller gives the property to the buyer and takes a note for the equity.

The Wrap - Another formula to acquire real estate without cash.

Execute a note which assumes all existing debt as well as the seller’s equity. This is commonly referred to as a wrap-around mortgage and in some states is accompanied by an all inclusive deed of trust. One of the benefit of the seller is that he will make interest on money he owes on the existing financing. Careful with “due on sale” clauses.

Partnerships - A good method for the investor with limited funds. Learn to create a “no cash” interest in real estate by bringing partners together.

When you as an investor have limited funds for investing. It is possible with this technique for you to receive a “NO CASH” interest in real estate. You are the one who puts everything together so that all parties are happy with the deal. You will have certain responsibility to the partnership; management, repairs, inspection, liquidations. You are going to need a partnership agreement.

How do you package this property?

Where do you find partners with cash?

How much do you pay for the real estate?

Delayed Settlement with Right of Possession, Subject-To Existing Mortgage - Use this formula to create cash when there is little or no equity and control equity while developing a marketing plan.

This creative method of investing has a long title with many potential benefits and risk. When the risks are known in advance, it is up to you to decide if you want to take them.

The elements:

Wholesale

Subject to

Long Settlement

Possession

Assignability

Wholesale property is found, you offer to buy the property, but you need the right of possession and you want to take over the existing financing, and you want to settle sometime in the future.

Exchanging Created Paper for Personal Property. Learn how to use equity, trade notes and create cash to a third party to achieve personal property without borrowing. This formula can help complete a transaction within 48 hours.

“In Lieu Of” - Cash, paper or property is offered in an exchange, but cannot be accepted due to tax or other reasons. This method of equity building will save you capital gains taxes. It is possible to accelerate equity.

Sell/Exchange Option Back - Use this formula to dispose of property that will appreciate, sell at fair value, but retain future appreciation, cash out later. This formula makes it possible to liquidate a large portfolio quickly.

Discounted Sale—Option /Buy Back - This formula works well when money is needed quickly. Use it also with encumbered property,” subject to” and free and clear real estate. Receive cash in 72 hours.

Mortgage Out

Borrow 100% of the sales price

Refinance w/Seller/Carry Back 2nd

Obtain a first mortgage, have seller take back balance of his equity. Have seller take back an unsecured note for the equity. Ask seller to refinance the property, keep the proceeds, you take over the mortgage subject to that mortgage, he gives you the deed.

Create Paper

Create a mortgage and a note on something else you own, use it for a down-payment for the property. Use split notes.

Effort Equity

If the property needs work, let the owner know that the bank will not lend money on the property in its present condition. Ask the seller to pay you to make repairs, use the amount of the repairs as your down-payment.

Borrow Against Paper

Pledge your mortgage notes for cash.

Seller Pays Buyer

Ask the seller to give you money to buy their property. This works more often than you think, you never know until you ask.

Acquire w/Future Profits

Get the seller to agree to take a percentage of the future cash flow. Give the seller a written pledge. Give the seller an agreement to pay his equity upon sale of the property within a period of time. You agree to sell it and guarantee him his equity or agree to share a percentage of the net equity.

Assign/Rents

Assign a certain portion or all of the rents to the seller in exchange for their equity.

Repair Partnership

Agree to repair other properties seller owns in exchange for the down-payment.

Credit Union

Borrow as much as you can from your credit union to buy high return real estate, to low at hard-money interest rates or buy discounted mortgage and use the mortgage as down-payments at face amount.

Family Partnership

This works especially well when you have good relations with your family and they trust you. Have your relatives put up money for down-payments, give them an attractive return with good interest rates.

Soft Paper

Offer soft paper; interest only, no payments, single payment notes, unsecured notes, a post dated check for 3-5 years

Acquire w/1st/2nd/Discount/Sell

Offer to purchase by give the seller a first and second mortgage, sell one or both of the mortgages for cash. You can make the sale subject to the sale of same.

Land Sale Lease-back

With certain types of property you can raise down payment funds by setting up a land sale lease-back. Sell the land under the building and create a ground rent for 30 years. The ground lease acts as security. You provide protection for the land purchaser by allowing him to step in if there’s a default on either the mortgage or the land lease. The proceeds from the land sale go to the seller of the property you are acquiring as down payment to cash out his equity.

Lease Down-payment

When you are buying someone who is both owner and tenant of the property, this technique can help offset the down payment.

Consider offering the seller use of the property as down payment. If he plans to keep his business in the same location anyway, you have an opportunity to cover part of the down payment. Essentially, you trade a short-term lease for the down payment.

The seller gets continuing use of his established business location for the term of the lease instead of cash down payment. You get the property with all its burdens and benefits but without the outlay of cash.

The purpose of this technique is to make a direct move between buyer and seller without the unnecessary step of running cash through the hands of the buyer, then to the seller, and back to the buyer again. Furthermore, if you are able to negotiate beneficial use of the rent before you receive it, you pick up a time value advantage which makes the rent worth more when applied in lump sum to the down payment than it was when received monthly.

Installment Down-payment

This technique allows you to acquire property now, but pay the seller’s equity by making installment payments as you raise the cash. The income from the acquired property offsets the down payment installments permitting you to avoid a lump sum cash outlay at closing.

For example, if you negotiate quarterly down payment installments of $3,000 and the cash flow is $500 per month, your net out-of-pocket cost will be only $1,500 per quarter. The installment payments are secured by a second or, better yet, a personal note payable to the seller.

Note Partnership

There are many variations of the NOTE PARTNERSHIP.

Syndication – put together 20 people, each will put up $30,000, $25,000 note with payments of $300.00 a month and $5000 in cash. This give you $100,000 in cash and $500,000. Use the cash and notes to acquire real estate. Each partner receives a percentage of ownership of the real estate as a passive partner. You place yourself in the partnership as a 30-50% equity position.

Have fun - stay in touch