All Forum Posts by: Ken M.

For 30 years I have practiced Creative Financing and it has been proven to work in all markets. Expensive markets like L.A. CA, OR, WA , NY moderate places like AZ, TX, IL, FL, GA, TN and inexpensive places like AL, MS, KY. In fact, it works anywhere in the USA. It's basically taking over the seller's financing, legally. Almost ALL loans & lenders have a Due On Sale Clause, which you need to know about. There is a protocol to follow.

Some kinds of Creative Financing include

1. Subject To (sometimes shortened to SubTo)

2. Selling Financing

3. Wrap

4. Lease Option

5. Contract for Deed

6. Land Trust

7. Short Sale

8. Private Financing

9. Hard Money Loans

10. Seller Carry Back

There are other creative financing avenues, but these are the "common" ones. I'd once traded a boat for property. I also have traded professional services for property. You can find "mix and matches" and each has it's advantages along with disadvantages. Some, you take title, some you wait awhile to get title. Having Title means the state recognizes you as the owner. Each state conducts these a little bit differently and it's important to know what is accepted in each circumstance. There is not a  master list by state and municipality. Laws change. It's important to get current information when dealing with creative finance. But, it's worth it. 

These can be used for "fix and flip", STR, Rentals, personal residence, 2nd homes, BRRRRR, MTR, Student Housing and/or whatever you use real estate for.

When contemplating doing creative finance, it's still highly recommend that you have a written Purchase and Sale Agreement, that you still order a Title Report and know what it's for and how to interpret it, don't do a closing in the seller's home, don't put the deal in a "Land Trust", do use Escrow, do record and do follow applicable state and federal laws. If you aren't being told about the Federal laws involved, flee that mentor. Lawsuits are expensive but unnecessary when business is conducted properly.

The item a lot of new investors miss, is the history of how that particular type of creative financing has been viewed and litigated locally. Anyone who mass teaches a concept and gives you the impression that it is acceptable everywhere, is "blowing smoke" to collect membership fees. No such thing exists. There is no "SubTo Insurance" There is no provision anywhere in the country that "deeding back  a property" gets you off the hook for violating the Due on Sale or violating the law. 

These above methods are effective, useful to both the buyer and the seller, but there are guidelines to follow. If you want more detail, let me know.

Quote from @Daniel Sehy:

I’ve noticed a shift lately in how investors are underwriting, interest rates are higher, expenses are less predictable, and tenants seem more price-sensitive in some markets. Personally, I’ve started running more conservative models, building in higher vacancy assumptions and smaller rent bumps than I used a couple of years ago.

At the same time, I don’t want to get so conservative that I miss good opportunities. There’s always a balance between protecting downside and chasing upside, and I’m still figuring out where that line should be today.

I’d really appreciate hearing how others are approaching this. I know BiggerPockets has investors at all stages, from first deal to institutional level, so I’m curious what’s working for you.

Questions:

• What assumptions are you baking into your underwriting right now?

• Are you stress-testing interest rates, vacancy, or rent growth more aggressively than before?

• Do you think today’s environment favors caution, or is it creating openings for bold plays?

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I keep it simple. I look at Redfin.com Solds in the last 3 months in the neighborhood, of like construction, size, year and build, then I also look at Rentals for the area to make sure my offer cash flows. If it doesn't cash flow, I reduce my offer.

Quote from @Deborah Wodell:

Hey everyone,

I wanted to get some perspective on a situation a friend of mine is dealing with. They’ve done a couple of private money lending deals, had agreements and promissory notes in place, and everything looked solid upfront. But now the two borrowers they funded have completely stopped responding.

What would you do in this situation? Has anyone here had to deal with borrowers going dark even with paperwork in place? Did you pursue legal action, work with a collection agency, or find another route that helped recover the funds? Put liens on the properties? 

Curious to hear how others have handled this. Thanks in advance for any insight you can share.

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Let us know who they learned lending from, so other new lenders can avoid their "teachers".

Quote from @Daniel Sehy:

Like many of you, I've read about all kinds of creative financing strategies; seller financing, master lease options, JV partnerships, equity swaps with contractors, you name it. But what I've found is that a lot of the examples floating around are theory or "what could work," not actual deals that closed.

It's personally opened my eyes to possibilities I had overlooked before. But I know there’s a lot more to learn. I don’t want to reinvent the wheel if others here have real-world examples of how they structured something creative and made it a win-win for all sides.

I’m not looking for secret formulas or gimmicks. just solid, practical insights from folks who’ve put these ideas into action.

Questions:

• What’s the most creative (but legal) financing structure you’ve successfully used?

• How did you convince the other party (seller, lender, investor) to buy into it?

• Did it become a repeatable strategy for you, or was it more of a one-off?

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I have bought only using Subject To for 30 years. It's not for everyone. Very risky at first, unless you are well financed or properly trained. I was not and have the "experience" to prove it. It requires knowing what to look for, knowing the law, knowing legal financing and making lots of offers. Yes, it's very profitable when done correctly. 

Quote from @Nick Roberts:

I'm an architect in Durham, NC working toward expanding my business into real estate development and investing. I started my firm four years ago with a focus on residential design with some small commercial mixed in. We've been doing a mix of custom residential projects - single family renovations, additions, new builds, etc. - as well as developer driven urban infill projects - small apartment and condo buildings, duplexes, ADUs, site analysis studies, etc. I also have years of experience swinging a hammer and working for a GC. Job sites are one of my favorite places to be.

I've become much more interested in the financial side of projects and wanting to get much more involved in real estate development and investing. A friend who is an architect/developer recommended I check out Bigger Pockets and I've been listening to podcasts and reading the site almost daily. The amount of resources here for learning are incredible. 

I joined the forum for networking opportunities, local meetups, potential partnerships, and as another resources for learning and asking questions.

Are there any other architects here who also do real estate development and investing?

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You have a good background for investing
The only caution is that Architects and Interior Designers tend to over design. Design costs money and time. Design to the market, not to what you'd like the market to be.

Real estate veteran warns ‘hopelessness’ in housing market threatens the American dream

Treasury Secretary Scott Bessent confirms administration considering national housing emergency this fall

PMG Affordable principal and Lehman Brothers alum Dan Coakley speaks to Fox News Digital about why now is the time for the White House to declare a national housing emergency.

As the Trump administration considers declaring a national housing emergency, an affordable housing developer who began his career at Lehman Brothers unequivocally agrees the proclamation is overdue.

"I think for sure we're in a national housing emergency. I think we've been here for some time," Dan Coakley, Property Markets Group Affordable principal, told Fox News Digital.

"As far as I'm concerned, it's right on time," he added. "If you look back over the last 10-plus years where there's been a housing emergency, no White House has really taken ownership of this issue, despite the fact that, in my view, it's probably the most important issue out there in the political realm and in the realm of what's most meaningful in the lives of everyday people."

On Monday, Treasury Secretary Scott Bessent told the Washington Examiner that the Trump administration may declare a national housing emergency this fall, citing rising prices and dwindling supply.

Quote from @Lee H.:

I’ve got a piece of land I’m looking at selling. I have roughly 100k into it and sale price would be roughly 250k. I’m looking for some ideas on how i could go about saving some on the capital gains tax.  I don’t believe I can 1031 it, as I have never rented over the three years that I’ve owned it. The only thing I’ve done to the property is clean it up. 

Question 1- am I correct thinking this is not a sale I could 1031 exchange?

Question 2- could I split the sale over two years to help?

Question 3- I do plan on reinvesting my gains do I have any other options?

Thanks,  any info appreciated 

Consider selling on a Land Contract or on a Lease Option, you may be able to be taxed only on the amount collected in each given year.

Quote from @Doug P.:

I just asked it about buying sub2 in Canada and the results were nonsense that would at best get me sued. But how would I know that if I didn't already understand how sub2 investing works in Canada?

If you're asking it questions about a topic you aren't already an expert in then how could you possibly know if the answers are accurate? You can't know what you don't know.

ChatGPT (or any of the others) is very good at giving answers that sound reasonable. But are they true?

Your comment: "If you're asking it questions about a topic you aren't already an expert in then how could you possibly know if the answers are accurate? You can't know what you don't know."

Great Point.

Quote from @Adam Macias:

Quote from @V.G Jason:

The first party in the transaction usually dictates the price. That's usually the seller via the realtor.

The seller has the right to list at whatever price they want. The market may not respond to it, but that's the market. Not the price. 

Speaking past theory, and in the real world 99% of buyers have no idea what the price is and the realtor's abilities to seize the emotional disarray is what actually makes it sell. Right now, the banks are the actual stopping point-- less approvals, less closings, stricter terms.

 I spoke with a seller in probate today who listed with a Realtor two months ago for $525k, it didn't sell, they did two price drops, had 50+ people come look at it..

The Realtor and PR BOTH listed it for what they dictated..

AND IT DIDN'T SELL.

Why?

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The definition of an appraisal is "what an appraiser's opinion of value is at that point in time" 

Time affects the value of property. It is not written in time nor is it guaranteed to be accurate.

Does anybody ever run the results the old fashioned way to see if ChatGPT gave the right answer? Seems to me that getting an answer and getting the right answer can be two different things. My limited experience is that ChatGPT or Grok or whatever they used produced an answer to an investing problem . . .  but it'd get him sued. The problem is when you follow bad advice . . . 

Now, if someone used ChatGPT to get ideas and then used a mathematical proof to "prove" the idea or action, that would make more sense to me. You know, like "check your work" back in your school days. There's a reason "checking your work" and "rereading what you wrote" was taught, to provide clarity and reduce errors.

I'm willing to bet that part is usually omitted. Checking their answers. It's like finding an answer on Wikipedia, which is random people making comments about subjects. Often comments that actually are biased about what happened at an event, comments that can be changed tomorrow with no record of the change. Subtle word changes that affect the outcome. 

(A mathematical proof is a deductive argument for a mathematical statement, showing that the stated assumptions logically guarantee the conclusion.)