All Forum Posts by: Aaron Caddel

@Damaso Bautista, appreciate the honesty! Haha. 

It's interesting you think that someone has to get screwed on a transaction for someone else to have their financial needs met. The people I do the MOST amount of business with are actually other real estate investors that I TRUST. When I need to park a mortgage on a different property to pull cash or shuffle equity or sell a note on a property to create cashflow on a deal, I'm rarely doing it with strangers, I'm doing it with the pros/friends. 

Perhaps part of the issue in real estate is this perspective that there is a zero sum game being played--that's not good business. 

You're in CA... If you had a rental with a monthly mortgage payment that left you in a negative cashflow situation, what if I offered to buy part of that mortgage with a larger balloon payment to make up for it on the backend (for me) so you could create cashflow TODAY. You're still making your principal paydown, and though you might pay more for the home in the long run (since I'm now taking a zero installment, balloon payment), you're NOW cashflowing on the property each month and can financially afford to buy the house. Did you get screwed or did I get screwed? Because I will actually do both of these types of transactions with my other investor friends.

PLEASE do not allow a temporary interest rate to stop your deal. If it's really a steal and you do not have the money, then I'd recommend getting a first position loan (preferably private to avoid points and ability to exit without penalty whenever you'd like) to buy in cash and the just refinancing after. If you did that for 6 months before seasoning into a refi, then what's the big cost to you? Six months from now you're potentially cashflowing $600+, so who cares about your short-term interest rate.

Additionally, I'm presuming in ALL of this that you have no equity/notes that are movable with your other investments (because that'd make this even easier to complete). Cash is easy mate, I'd take 8% ROI as a first position on a home ANY DAY, even if you only gave it to me for a few months.

Congrats on the deal you found! Sounds like this is a phenomenal investment.

If it's really a steal and you do not have the money, then I'd recommend getting a first position loan (hard money or private) to buy in cash and the just refinancing after you're 1099 enables you you qualify. Even if you were to just financed after getting rented for a few months (from seasoning), you'd be out of pocket nearly nothing at all. Additionally, I'm presuming in ALL of this that you have no equity/notes that are movable with your other investments (because that'd make this even easier to complete). Cash is easy mate, I'd take 8% ROI as a first position on a home ANY DAY, even if you only gave it to me for a few months. If you did that for 6 months before seasoning into a refi, then what's the big cost to you?

Congrats on the deal you found! Rooting for you to get it wrapped up!

Wise advise I've benefitted greatly from: adding cash will bring out a taker for any deal. I understand that you're not coming to terms with the seller on owner financing, but cash in hand might change that conversation. Introducing a fair negotiation on terms with (1) end price, (2) length of term and (3) cash up front could likely produce the results you BOTH are looking for. In the case that you do not have that necessary cash yourself (for a down payment), you could still offer a second position to an investor for that down payment and then restructure for a longer term with less interest later. The owner financed position is a potentially zero interest loan that should be considered.

Another quick note: consider leasing his land with an option agreement as well. You can have 3/4 of the lease payments credited to principal if you wanted, and then lock in a juicy purchase price that gets him/her salivating. 

In either scenario, you'd get low payment/zero interest payments that could be restructured whenever you like.

All just food for thought.

DM me or @Jason Dillard. I'd be interested to hear about the project plans, equity in your 5 properties and perhaps see where/how we might be able to get you the cash and/or just help you move some debt/equity around to fund your project.

I'm working on some seminar prep with @Jason Dillard. His presentation is centered around the idea of growing your transaction creativity/profitability through the mastery of paper. For REIs involved in development projects, practicing exchanges or just even creative finance strategies with buyers/seller, my question is: how much are you focusing on the power of debt in addition to the power of equity?

Here's some thought provoking points:

• The BORROWER can create cashflow for themselves through an exchange on their loan.
• Any defined number of payments can be sold. 
• A Balloon payment can also be sold.
• A sold balloon payment can be used to alter an interest rate, to generate cash, or even create equity.
• Mortgages can be moved and, obviously, sold.
• Paper can hide profit inside the financing
• Paper can raise cash for other deals
• Can make the purchase price of a property nearly irrelevant.

Two questions: (1) what are other ways YOU are using paper in your real estate investments and (2) how interesting is this subject matter for the average seminar-goer?

@Greg Stanley of course! I'll dm you now

@Olivier H. great question! People presume you need to ALWAYS own your own home before investing in rentals. This is not true and not a well thought-out argument. Run the numbers and see which situation would generate a larger Asset column on your balance sheet 5-10years from now and then make a decision on that.

If you're acquainted with corporate finance, think about a simple IRR calculation (internal rate of return). The problem executives/everyone has with IRR in finance is that it presumes you're able to reinvest each dollar of profit back into the investment as soon as it's in your hand. That's obviously not possible. By lowering the threshold of investments means you are holding onto cash for less time and have what I might refer to as a more "realized" internal rate of return. For your first property, this isn't a huge consideration, but it does still mean that if you have the opportunity to invest cash earlier than later, you have the ability to begin making returns.

If you have a good DTI and cash to spend but not interested in house hacking or moving your family, it can offer a lower barrier of entry to buy a rental first. I'm originally form Los Angeles, CA so this is the way most younger investors have to get started.

@Madigan Tumilowicz welcome to Charlotte (virtually!). There's some phenomenal markets all around the charlotte area. Neighborhoods just outside of Charlotte are witnessing similar appreciation % to Charlotte but achieving higher rent %. Pretty awesome market to get involved in. Reach out whenever if you'd like to brainstorm ideas or discuss discounted properties!