How to Creatively Finance Your Next Real Estate Deal

Welcome to the Seller Financing & Master Lease Options! As you progress through the program, you will understand why real estate is one of the best investment vehicles for achieving financial freedom and building a successful and scalable business.

First, we would like to get to know you better. Please introduce yourself! Tell us your name, where you’re from, what you do, and why you joined this program.

Our goal is to introduce you to creative financing techniques and show you how to get into your first deal utilizing these techniques. As you progress through the program, be sure to leave questions down below in the comment section and we will answer your questions!

Let's get started!

In this lesson, Bill & Gino dive into why creative financing works.

It works because:

• You are solving a problem.

• It can be quicker and cheaper.

• Debt is harder to secure in a recession.

• The property is difficult to finance through traditional means.

Creative financing is only one tool in the toolbox, but if utilized properly, it can create massive opportunities and wealth. As we will discuss, you need to be able to know when and how to utilize it properly.

What are the Three Pillars of Real Estate®, and why do you need to learn how to use them when you are investing in real estate?

Bill has been able to package together these Three Pillars so that the investor can take a holistic approach to investing, and factor all three of the pillars into the decision-making.

The Three Pillars of Real Estate™:

1. Market Cycle

2. Debt

3. Exit Strategy

In this lesson, we discuss why they are crucial to your success, discuss buying techniques that you need to employ, and how to use them together.

This lesson focuses specifically on the four phases of the market cycle, and what strategies are more likely to succeed in the specific part of the cycle that we are in.

In this lesson, Bill & Gino tackle the second pillar: Debt.

When analyzing what type of market cycle your real estate market is in, it is time to select the type of debt that you will be utilizing. This course focuses on creative financing techniques, and although the strategy works in all markets, your chance of success is much higher when we are in a buyer's market.

Bill and Gino discuss the various forms of debt, from bridge to community to agency, and explain why is it vital to select the right type of debt when investing in a property.

Bill shares a couple of "learning lessons", AKA mistakes, when he selected the wrong type of debt on one of his deals. A $1,000,000 mistake!!

Once you have selected the debt, let's analyze our exit strategy, the third pillar.

The Third Pillar of Real Estate is Exit Strategy, a pillar that Gino & Bill see most investors not take into consideration. You should always analyze a deal with the exit strategy in mind.

That does not mean that you become inflexible with your exit strategy. It means that you have a plan for what to do with the property once you own it and are managing it. The exit strategy will affect the type of debt you place on an asset.

A short-term hold may favor community bank financing, while a long-term buy and hold may favor the agency route. Having a plan with your exit strategy will give you clarity on what type of debt to secure.

Jake & Gino teach their proprietary framework: Buy Right, Manage Right & Finance Right ®.

Why has it been so effective for the Jake & Gino community? It delivers a framework for students to follow:

1. Create parameters to buy an asset

2. Focus on managing the asset

3. Secure financing for the asset

To have a successful investment, all three legs need to be executed. If one of the legs is insecure, then your investment will topple over like a wheelbarrow.

The two back legs of the wheelbarrow, the Buy & Finance, are both fixed. Once you execute them, they are done. The manage right portion is the wheel of the wheelbarrow, in that it is in constant motion.

Gino discusses the importance of putting together this framework with the Three Pillars of Real Estate™.

Creative financing techniques are an important part of the Finance Right portion of the framework!

What is the S.P.Y.™ technique?:

1. Seller

2. Property

3. You

The first and most important thing that you need to focus on when analyzing an opportunity is the seller. Ask yourself these questions:

1. How can I provide value to the seller?

2. How can I solve their problem?

3. What is their most urgent need?

A good deal starts out with a motivated seller, or as we like to refer to it at Jake & Gino, a Mom & Pop owner. A Mom & Pop owner is basically a seller who is burned out and looking to exit the deal. When you utilize the S.P.Y.™ technique, find out their motivation and how you can solve their problem.

Next is the property. Take an assessment of what the asset needs, and the repairs, and see if it is worth pursuing. Just because you can fix it doesn't always mean you should.

Finally, it's about you. You're the last one on the list. What are your needs, your skill sets, and your goals. Is it worth the effort?

If you follow this framework, it will lead to tremendous success when trying to purchase your next deal, especially a deal with creative financing.

The key to looking for creative financed deals is to NOT be looking for creative financed deals. What?

Remember, creative financing is only one tool in the toolbox when analyzing deals. It is a powerful tool, but if you only look at deals through the lens of creative financing, you may be passing up some terrific opportunities. Instead, underwrite a deal, and if it does not work with traditional means, underwrite it with creative financing.

Bill and Gino discuss this strategy, along with building rapport with your main source of deal flow, real estate brokers. We talk about negotiating and putting in offers to brokers and educating them on how to present creative financing to a motivated seller.

Other avenues for deal flow:

• REIA (Real Estate Investment Association) groups

• Facebook groups

• Meet Ups

• Live Events

• Seminars

Bill & Gino dissect an Offering Memorandum (OM) in this lesson to teach you how to analyze a deal before you decide to go on a property tour. Bill discusses how to begin collecting OMs from the brokers, and they both proceed to walk the student through the entire OM.

An OM is a marketing package put together by a listing broker to market and sell a property. As you would expect, this marketing package will be shiny and highlight all of the positives of the deal, while your job is to uncover any negative aspects of the deal.

Bill & Gino walk you through one of Bill's current holdings to show you what to be on the lookout for, how to use an OM to your advantage, and how to formulate questions to ask the broker.

You can download the OM and follow along.

In this lesson, Bill and Gino dive into the basics of deal analysis, including the three approaches most commonly used, the accrual and cash method of accounting, and how to analyze a Trailing 12 (T12).

In deal analysis, practice makes progress. Bill & Gino offer tips and suggestions on how to understand the story behind every T12, and how to utilize the story and numbers to help in your underwriting.

If you are a beginning investor, be sure to watch this lesson more than once to be able to become more proficient in your deal analysis skills.

Please download the (2) T12's under "Resources"

The key to making offers is to educate both the seller and the realtor about the benefits of utilizing creative financing. The realtors want to know that they will get paid, and we have to assure them of that.

The offer has to be crafted in a way to solve the seller's problems. When you are putting in offers, do not get in the habit of firing off offers on every deal you see, especially in the multifamily space. Realtors will not take you seriously, and neither will sellers. Do the work on the front end by analyzing the deal, and then put in your offer.

As we like to say at Jake & Gino, no deal is better than a bad deal.

When you begin the negotiation for a property, you need to find out as much information on the deal and seller as possible. We favor principled negotiation versus positional bargaining. It is much harder to negotiate when someone is stuck on a position, such as a price. When you negotiate on the principles, it will more often lead to success.

In this lesson, Bill & Gino go over various negotiation techniques, such as:

• Listening

• Mirroring

• The Accusation Audit

• Driven By Goals, Not Fear

• Try To Avoid Deadlines

• Try To Remove The Emotions

In this lesson, Bill & Gino discuss the various exit strategies in multifamily real estate:

1. Buy & Hold

2. Fix & Flip

3. Wholesale

4. Refinance

As we discussed in a previous lesson, it is vital to consider what your exit strategy is before you close on the deal. Bill's analogy of wheels up, once you decide to take off with the plane is excellent. You don't have to take off, but once you do, you will have to land it either wheels up or wings up. Isn't it better if you decide how you want to land?