Absolute Guide to Understanding Owner Financing | How to Owner Finance

#OwnerFinancing #Subject2 #RealEstateInvestor #PropelioTV
Owner Financing Explained - Grant Kemp

Grant details the most common real estate investment strategies from subject tos, wraps to free and clear. Noting how these can be very profitable methods with limited liability, he also explores the myths of owner financing.

Grant's Favorite Books to recommend:
Influence: http://amzn.to/2psvbb0
Traction: http://amzn.to/2kavg32

2:35 – SUBJECT TO: (Taking over payments) Seller owes $80K to bank, they want to sell you their house. Instead of you having to
-Essentially, you are taking over payments. The original owner’s name is still on the mortgage, the homeowners place stays
4:09 – FREE AND CLEAR: If the buyer is buying the house free and clear, the seller may want to put their own terms
5:13 - WHAT ARE LIENS: DEBT ON A PROPERTY
Common Types of Liens:
Mortgages – publicly filed with the county.
Mechanics Lien: Someone who has done the work and the homeowner does not pay.
Tax Lien: Federal Taxes, Property Tax (Cannot be dropped). If it is a homestead, you can get federal liens released.
Child Support Liens:
11:50 - The only important factor of lien position is the time and date that it was files.
First Lien and subordinate lien:
-That is the risk of taking a subordinate lien. If you are buying a house subject to, know what lien position you are. Mortgage continues to pay mortgage but does not pay mechanics lien. The second position lien forecloses, the third position (HELOC) gets nothing. The second lien position must pay off the first lien position.
17:36 – BUSINESS TIPS
1.Never put your name on the contract. Everything should be under an LLC. Put your name, as president, as VP, whatever. You want to avoid liability.
2.Need to create an LLC? Watch the “Creating an LLC” video.
3.Invest in Real Estate
-You are a single-family investor, not a wholesaler, not an owner financer, not a landlord. Hedgehog principal: Focus on what you are good at and make money at it. Don’t get distracted by shiny objects.
21:43 – ACRONYMS
1.ARV: After Repair Value – Value of a home after is had been fixed up.
2.LTV: Loan to Value – If loan is for $80K, and house is worth $100K, you are at 80% LTV.
3.Basis: Can be “cash” or “total.” Basis is like saying “What do you have in the deal?”
-How much cash have you put in or how much total have you put in. Owners owe $50K, it needs $20K in work, ARV is $100K. If you buy subject to and put $20K in rehab, you have $20K cash basis. Total basis = $20K cash + $50K mortgage = $70K Total basis. Cents/Percent/Cents on the dollar. Example above, total basis vs ARV, $100K ARV, $70K total basis. Basis is 70 cents on the dollar.
25:20 – WHY OWNER FINANCING?
-You don’t have to deal with tenants, toilets and trash. Your returns are actually set. Landlords must net out taxes, insurance, repairs, etc. Lost Appreciation – FALSE: Once you sell the property, you cannot take depreciation. The money you receive with owner financing gets less and less each year. Due to the time value of money.
30:31 – YOUR OWN NOTE
-This is a niche, if you can do it, you are ahead of the game.
31:22 – LOW BARRIER TO ENTRY
-Buying with owner financing takes very little equity. The education is the barrier to entry.
32:44 – FORECLOSURES
-Pro and Con: You must be ethical and only sell to people who can afford the house. If you must foreclose, you still have to pay your underlying debt, and wait the underlying amount of time. You now own the house again.
37:26 – MANY LEGALITIES
-Compliance laws, how to take over a mortgage. Use an attorney that specializes.
38:20 – UNLIMITED FUNDING
-No bank looking at your debt-to-income ratio

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