Today’s REI Classroom Lesson
Today, Larry Goins goes over different opportunities to utilize when closing and what sources can be used for funding.
REI Classroom Summary
Learn a few ways to close and fund a deal without having capital to back it up.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the FlipNerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Larry: Hey, this is Larry Goins and welcome back to another episode of REI Classroom. Today I’m your host and trainer. Now one of the things we’re going to talk about today is all the different ways to close and all the different ways to fund your deal.
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Larry: Now whether you have money or not, it’s okay. In fact, I take the attitude that you make your best deals when you have no money because you’re looking for that great deal and that great deal has got to be a homerun. In fact I tell all of my brand new students, “If you’ve never done a deal before, make sure your first deal is a home run.” That’s very, very important.
So many people get into the mode of “I’ve got to get a deal, I’ve got to get a deal, I’ve got to get a deal.” No, forget about it. You’ve got to get a good deal. That’s what you need, especially if it’s your first one.
So here’s what I want to do. I want to run through this. It’s going to be kind of quick because there are a lot of them, but I want to run through a lot of the different ways that you can close and fund on a deal where you don’t need any of your own money.
The first thing I want to talk about is assignments. Most people know what assignments are. If you don’t, it’s okay. In your contract, when you’re buying a property, you put the name of the buyer. It might be your name or it might be your LLC.
Like for example, if it’s Larry Goins, LLC, right after that I’m going to write the words and/or assigns. That means I could use an agreement that is an assignment of contract and I will assign that contract. Say if I bought it for $50,000 and I’m assigning it for $10,000, that means my buyer is paying $60,000 for the property. It’s pretty simple.
Now another thing you can do, a lot of realtors and banks do not like you to put assignments in their contracts. It’s mostly done with individuals. Here’s a little trick that you can use. I don’t even like the word trick. It sounds underhanded, but it’s not.
Here’s a strategy that you can use. You put these words in your contract. Buyer reserves the right to change buyer entity name at closing. And you do this because if they ask you, you tell them we’re doing this because I never know what entity I’m closing in. I’ve got private money, I’ve got other people I work with, I have partners. And I buy and sell property so I never know. And most of the time that will go through. Does everything work 100% of the time? No, it doesn’t. But it will work most of the time.
Now, next thing. Options. What is an option agreement? An option gives you the right but not the obligation to buy a property. If you have a contract to buy a property, you’re obligated to buy that contract as long as all the terms and conditions are met. But an option gives you the right, but not the obligation.
But here’s the key thing. Your option consideration unlike a deposit is non-refundable. In other words, maybe you’ll give me an option to buy your property for $50,000 for the next 90 days. And I’ll give you $100 for that right. Well, at the end of 90 days, I can either exercise that option and close on the property if I find a buyer or I could simply let the option expire and you walk away with the $100 and I’ll never see that $100 again. But I don’t have the obligation to buy that property.
Okay, let’s talk about a few other things that you can do to assign a non-assignable contract. One of the things that you can do is create a trust, a land trust, such as let’s say the address is 125 Oak Street. You create a trust, call 125 Oak Street Trust.
Now in a trust, there’s the trust agreement and there is the trustee which that’s a third party that signs the documents and then there’s a beneficiary. That’s you. That’s the person who has the beneficial interest in the trust. So you have this trust, 125 Oak Street Trust.
Okay, now I’m buying it from an individual and I want to sell it to you. It’s really only one real estate transaction because I’m buying it in the trust and the trust is going to continue to hold the property. However, I’m going to sell my beneficial interest in the trust for $10,000. The end result is my buyer is paying $60,000 for the property where I paid $50,000.
You can do something very similar with an LLC. You can create an LLC, say 125 Oak Street, LLC. Once you do that, I’m the soul owner of that LLC, I get a property under contract for $50,000, then I turn around and sell that for $60,000. All I’m going to do is sell my LLCs, all of the shares in the LLC to my buyer for $10,000. Now they’re the owner of the LLC which owns the property that was just purchased for $50,000. Very similar but a little bit different.
Now, what are some ways the fund your deal really quick. You can use private money. You can use hard money. You can use cash partners. You can use credit partners. You can do a simultaneous closing. If you can find a local investor friendly attorney or title company, a lot of times they will allow you to use your buyer’s money to pay your seller.
So you don’t have to come to the closing with any money. We do it all the time. Even though we do have money to do deals now, a lot of times they don’t even make us send the money when we’re buying and selling the same day.
You could also use self directed retirement accounts. Did you know you could buy real estate in your IRA? Yeah, you can. It’s got to be a self-directed retirement account. Google it, you’ll find out. You can use peer-to-peer lending sites like Prosper.com and LendingClub.com. You can also use crowdfunding like Kickstarter. You can raise money on eBay. You can sell things on Craigslist. You could also do transactional funding.
When you’re buying it at 10:00 and selling it at 10:30 for example, there’s transaction funding lenders out there. They will loan you the money for one day.
So I hope you’ve enjoyed this episode. Thanks a lot for watching. I’m Larry Goins and you can get more information at LarryGoins.com or if you want a free copy of my latest book, HUD Homes Half Off, go to freehudbook.com. Thanks a lot. And I’ll see you on the next lesson.
Mike: VirtualStaffNow.com is the leading virtual system provider for real estate investors. As busy real estate investors, there’s nothing more valuable than our time and VirtualStaffNow.com not only helps you find the right real estate virtual system for your business, they train them on an ongoing basis, manage them daily to make sure they’re staying productive and effective. And in the event they’re not the right fit or need to be replaced, they handle that for you too. Whether you need 1 or 100 virtual assistants for your team, start the process right now at VirtualStaffNow.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.
Are you a member yet of FlipNerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at FlipNerd.com.
Please check out the FlipNerd family of real estate investing show where we host four great ongoing shows at FlipNerd.com/shows, or simply search for FlipNerd in the iTunes store.
Larry: Hey, this is Larry Goins and welcome back to another episode of REI Classroom. Today I’m your host and trainer. Now one of the things we’re going to talk about today is all the different ways to close and all the different ways to fund your deal.
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Larry: Now whether you have money or not, it’s okay. In fact, I take the attitude that you make your best deals when you have no money because you’re looking for that great deal and that great deal has got to be a homerun. In fact I tell all of my brand new students, “If you’ve never done a deal before, make sure your first deal is a home run.” That’s very, very important.
So many people get into the mode of “I’ve got to get a deal, I’ve got to get a deal, I’ve got to get a deal.” No, forget about it. You’ve got to get a good deal. That’s what you need, especially if it’s your first one.
So here’s what I want to do. I want to run through this. It’s going to be kind of quick because there are a lot of them, but I want to run through a lot of the different ways that you can close and fund on a deal where you don’t need any of your own money.
The first thing I want to talk about is assignments. Most people know what assignments are. If you don’t, it’s okay. In your contract, when you’re buying a property, you put the name of the buyer. It might be your name or it might be your LLC.
Like for example, if it’s Larry Goins, LLC, right after that I’m going to write the words and/or assigns. That means I could use an agreement that is an assignment of contract and I will assign that contract. Say if I bought it for $50,000 and I’m assigning it for $10,000, that means my buyer is paying $60,000 for the property. It’s pretty simple.
Now another thing you can do, a lot of realtors and banks do not like you to put assignments in their contracts. It’s mostly done with individuals. Here’s a little trick that you can use. I don’t even like the word trick. It sounds underhanded, but it’s not.
Here’s a strategy that you can use. You put these words in your contract. Buyer reserves the right to change buyer entity name at closing. And you do this because if they ask you, you tell them we’re doing this because I never know what entity I’m closing in. I’ve got private money, I’ve got other people I work with, I have partners. And I buy and sell property so I never know. And most of the time that will go through. Does everything work 100% of the time? No, it doesn’t. But it will work most of the time.
Now, next thing. Options. What is an option agreement? An option gives you the right but not the obligation to buy a property. If you have a contract to buy a property, you’re obligated to buy that contract as long as all the terms and conditions are met. But an option gives you the right, but not the obligation.
But here’s the key thing. Your option consideration unlike a deposit is non-refundable. In other words, maybe you’ll give me an option to buy your property for $50,000 for the next 90 days. And I’ll give you $100 for that right. Well, at the end of 90 days, I can either exercise that option and close on the property if I find a buyer or I could simply let the option expire and you walk away with the $100 and I’ll never see that $100 again. But I don’t have the obligation to buy that property.
Okay, let’s talk about a few other things that you can do to assign a non-assignable contract. One of the things that you can do is create a trust, a land trust, such as let’s say the address is 125 Oak Street. You create a trust, call 125 Oak Street Trust.
Now in a trust, there’s the trust agreement and there is the trustee which that’s a third party that signs the documents and then there’s a beneficiary. That’s you. That’s the person who has the beneficial interest in the trust. So you have this trust, 125 Oak Street Trust.
Okay, now I’m buying it from an individual and I want to sell it to you. It’s really only one real estate transaction because I’m buying it in the trust and the trust is going to continue to hold the property. However, I’m going to sell my beneficial interest in the trust for $10,000. The end result is my buyer is paying $60,000 for the property where I paid $50,000.
You can do something very similar with an LLC. You can create an LLC, say 125 Oak Street, LLC. Once you do that, I’m the soul owner of that LLC, I get a property under contract for $50,000, then I turn around and sell that for $60,000. All I’m going to do is sell my LLCs, all of the shares in the LLC to my buyer for $10,000. Now they’re the owner of the LLC which owns the property that was just purchased for $50,000. Very similar but a little bit different.
Now, what are some ways the fund your deal really quick. You can use private money. You can use hard money. You can use cash partners. You can use credit partners. You can do a simultaneous closing. If you can find a local investor friendly attorney or title company, a lot of times they will allow you to use your buyer’s money to pay your seller.
So you don’t have to come to the closing with any money. We do it all the time. Even though we do have money to do deals now, a lot of times they don’t even make us send the money when we’re buying and selling the same day.
You could also use self directed retirement accounts. Did you know you could buy real estate in your IRA? Yeah, you can. It’s got to be a self-directed retirement account. Google it, you’ll find out. You can use peer-to-peer lending sites like Prosper.com and LendingClub.com. You can also use crowdfunding like Kickstarter. You can raise money on eBay. You can sell things on Craigslist. You could also do transactional funding.
When you’re buying it at 10:00 and selling it at 10:30 for example, there’s transaction funding lenders out there. They will loan you the money for one day.
So I hope you’ve enjoyed this episode. Thanks a lot for watching. I’m Larry Goins and you can get more information at LarryGoins.com or if you want a free copy of my latest book, HUD Homes Half Off, go to freehudbook.com. Thanks a lot. And I’ll see you on the next lesson.
Mike: VirtualStaffNow.com is the leading virtual system provider for real estate investors. As busy real estate investors, there’s nothing more valuable than our time and VirtualStaffNow.com not only helps you find the right real estate virtual system for your business, they train them on an ongoing basis, manage them daily to make sure they’re staying productive and effective. And in the event they’re not the right fit or need to be replaced, they handle that for you too. Whether you need 1 or 100 virtual assistants for your team, start the process right now at VirtualStaffNow.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.
Are you a member yet of FlipNerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at FlipNerd.com.
Please check out the FlipNerd family of real estate investing show where we host four great ongoing shows at FlipNerd.com/shows, or simply search for FlipNerd in the iTunes store.
