Real estate investing has its risks. Circumstances can change, and if you’re going to hang around this business for any time at all you have to change with it. The market is constantly changing – it goes up and down – and when market trends take an unpredictable dip, often times, homeowners and would-be homeowners are hit the hardest.
Financing a home becomes even more complicated and more difficult to acquire. Banks refuse to finance regardless of how stellar a person’s credit score is. This is totally understandable because of the risks a declining market pose.
However, owner financing works in all markets. During these times, it’s important for homeowners who want to sell and aspiring homeowners who can’t get bank financing to understand how creative funding, notes, and owner financing comes into play.
In this episode, I bring Bob Zachmeier, number one REO broker in Arizona and creative financing expert, to share with us his expert opinion about how creating 2nd notes are profitable for the seller, the buyer and the lender.
Traditionally selling a house entails other costs such as repair costs, closing costs and carry costs. If you factor in the time it takes, usually about three to four months vacancy, before it sells, traditional selling actually costs even more than that.
Meanwhile, creative or owner financing sells faster and, at the same time, gets rid of the repair, closing and carry costs all at the same time. On top of this, there are more houses available for buyers who do not qualify for a bank loan.
By having a buyer put up at least 10% down, a lender can require any amount as a first note and you the investor puts up the difference as a second note (both payable at a certain number of years), the seller NETS MORE money, the buyer SAVES money and the lenders MAKE money on their notes without all the hassle a bank financing. Everyone wins!
If you’re at all curious about creative financing and how you can make notes work for you, this two-part episode is basically a crash course to get you started.
Listen and learn:
- I talk to Bob about his experience as the number one REO broker in Arizona during the recession.
- Why Bob likes creative finance as a strategy.
- What the heck is second notes?
- We go through a few scenarios to help simplify how creating second notes is a win-win for everyone involved.
Mentioned in this episode:
- Joe’s podcasts on iTunes: Real Estate Investing Mastery Podcast
- Joe’s book on REI Secrets: http://www.reisecrets.com/
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