My 5-Steps Process to Wholesale Creative Finance Deals! #Finance

on this CashNews.co I’m going to show you my proven five-step process to wholesale creative financing deals using my new creative financing calculator that will automatically calculate your wholesale fee so you know instantly if you have a good deal and how much you can wholesale it

for now don’t worry if you’re new to creative financing I’m going to simplify the process of evaluating structuring and wholesaling creative Finance deals so be sure to stay

to the end of this CashNews.co because I’m going to show you how to get my creative financing calculator for free but first if you don’t know me I’m Jerry Norton I make millions of dollars a year wholesaling and flipping houses and here on my YouTube channel I show you how to do

the same so if you want to be a flipping Genius Like Me and live your dream life subscribe to my channel and watch my CashNews.cos as a wholesaler learning how to wholesale creative deals is another tool in your toolbox as of this recording with higher Interest Rates investment

Loans are more challenging to get making it harder for Buy and Hold investors to add Cash Flowing properties to their Portfolios for that reason if you can bring a Cash Flowing creative

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance property with favorable terms and little money down you will be able to wholesale those deals for a premium let me show you how using my five-step process step one is to get the seller open and willing to consider

creative here’s how I like to do this first when negotiating with a distress seller and it comes to price I usually anchor with a low cash offer and then if they don’t accept I’ll counter with a higher paying creative offer the reason why I start with a low cash offer is because I

want to establish a baseline for what I can pay if the seller wants the speed and convenience of a low cash offer great I’ll take that every time but if the seller isn’t willing to take my low cash offer then now I’m primed for offering creative I’ll usually say something

like I understand that the speed and convenience of a cash offer isn’t the right fit for you right now I may be able to pay more maybe even your asking price if you would be open or creative on how and when I pay you is that something you would consider exploring with me now nine out of 10

times they’re going to respond by saying what does that mean if they own the property free and clear you could say there’s a common method we do all the time called seller financing where I would buy the property from you at a higher price but rather than getting a new

Loan to pay you in full instead you actually become the bank for me the way it works is we would agree on a price I would give you some cash down at closing and then the balance I owe you is paid with interest over time just like a bank Loan the benefit to you is

you get a higher price and you earn interest on your Loan to me for me it’s worth paying a higher price because I don’t have to tie up the cash or go through all the brain damage of getting a new bank Loan we’ll discuss how to determine the terms

in a minute but let’s suppose that the seller doesn’t own the property but rather has an existing Loan in place which is very common the creative financing method used in that situation is called subject to the existing Loan or subject to for short now

you would expect playing your higher counter price slightly different by saying there’s a common method we do all the time where instead of me getting a new Loan to pay off your existing Loan I would just take over your existing Loan and take

full responsibility for the property whatever price we agree on above your current Loan balance I would pay you in cash at closing the benefit to you is you get your property sold and can walk away possibly with some cash in your pocket for me it’s worth paying a higher price

because I don’t have to tie up the cash or go through all of the brain damage of getting a new Loan just to pay off your existing Loan if and when the seller is open to create a financing it’s time to look at the financials to see if you can create

Cash Flow and how much Cash Flow using favorable terms creative is all about the numbers once you understand the numbers you can structure a deal that makes sense and this takes us to my creative financing calculator step two to wholesale a creative deal is to

determine what the net operating Income is for the property net operating Income or noi is the Cash Flow that is created after factoring in operating expenses now this is done by taking the gross rents minus all of the anticipated ongoing operating

expenses so if you look at my calculator let’s take a look at the rent analysis right here is where you enter the gross monthly rent and these are the different operating expenses and when you subtract them from the growth rent what’s left is the noi now keep in mind the property may be

used as a long-term rental or it might be ideal for a short-term rental depending on the property and the location my calculator has both options as well as single family or multi-family so let’s take a look at all of these different rent options let’s say that the deal you’re

looking at is a three bedroom single-family home under the unit mix long-term box right here you would put one unit and the monthly rate of let’s say 2500 then right here under gross rent you would carry that over and put 2500 if you don’t know what long-term rents are Zillow has a free

rent estimator tool that you can use on the other hand if you think it might make a good overnight rental property then under the unit mix overnight box you would put one unit under three bedroom and ADR stands for average daily rental and let’s say that the ADR is 250 dollars under occupancy

you would put the percentage of days during the month that the unit is projected to rent so in this example let’s say 60 percent with that information it automatically calculates the adjusted daily rate of 150 as well as the gross monthly Income of forty five hundred now the

best way to determine the ADR and occupancy rates for overnight rentals is with a tool called air DNA so if you decide that overnight rental is The Right Use of the property then carry the gross Income of 4500 over to the gross rent box under the rent analysis right here so

that’s looking at the rent options with a single family home let’s do the same comparison with multi-family let’s say that the property you’re looking at is a four Plex apartment under long-term use two of the units are one bedroom that rent for 700 each per month and the

other two are two bedrooms that rent for let’s say 9.50 each per month that would make the total gross rents 3 200 per month so you carry that over to the gross rent box under rent analysis and if you wanted to run the numbers for overnight on a four Plex let’s say that a one bedroom

rents for 150 as an average daily rate with a 50 occupancy and the second units rent for 150 ADR with a 50 occupancy the gross monthly Income would be 7 500. so you would carry that over to the gross rent box under rent analysis so now that we’ve established the different

ways to calculate the different Income options let’s talk about operating expenses every property is going to have property Taxes and Insurance but the operating expense is based on what type of rental is going to depend varying on whether

it’s a long-term rental or an overnight rental but as a general rule of thumb operating expenses for residential use typically range from 30 to 40 percent of gross Income so right here you can see that the noi is 1746 which is 70 percent that means the operating expenses are

30 percent once you’ve established the noi step three is determine the Debt service now Debt Service is the cost of financing remember creative financing is all about leveraging existing Debt or creating new Debt from the

seller’s Equity the cost of financing for The Debt Service varies depending on the Loan amount the interest rate and the length of the Loan and so on this is where the majority of the creative part comes into play because

depending on how the Debt service is structured is going to determine if you have a winner deal or not you’ll see what I mean as I use my creative calculator in a minute hey wholesalers if you haven’t heard of propwire it’s the best thing to happen to Real

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propware has the data to power your business too check it out at jointpropwire.com let’s start with seller financing and let’s say that the seller wants a hundred and seventy five thousand dollars for the property with ten thousand dollars down and let’s say that there’s an

agent involved who will get paid five thousand two hundred and fifty and let’s say that the closing costs are going to be thirty five hundred and let’s say that the assignment fee is 17 000. I’m going to come back to how we calculated the assignment fee later and let’s also

assume that the property needs ten thousand dollars in work to make it rent ready that means if I add up the purchase price plus all of the fees to get in the deal the total cost of acquisition for an investor is two hundred and ten thousand nine hundred and sixty three dollars and since this is a

seller Finance Loan and a seller agreed to sell it for 175 000 with 10 000 down the Loan is going to be for a hundred and sixty five

thousand that means the cash needed to get in this deal or what we call the entry fee is forty five thousand nine hundred and sixty three now notice right here there is a line for private money Loan number two that would be if you used a third party private lender to fund some or

all of the entry fee but for now let’s leave that blank assuming those are the purchase and acquisition numbers now let’s look at the Debt structure right here is the seller text-decoration: none;">Finance Loan amount of 165 000. and let’s say that we use a five percent interest rate over 30 years with a five-year balloon that means even though the Loan payments are spread out over 30 years the balance owed would be

due at the end of five years so based on the Loan amount interest rate and length of Loan my calculator automatically calculates the monthly principal and interest payment to be eight hundred and eighty five dollars if there was a second position private money

Loan this is where we would calculate those payments for example let’s go back up here and put twenty five thousand dollars for a second position private money Loan down here let’s say that there’s a 10 percent interest only payment so

there’s no amateurization over 30 years and let’s say that there is still a five-year balloon so that monthly payment would be 208 dollars bring in the total monthly Debt Service to one thousand and ninety four dollars but for now let’s get rid of the private

money Loan of twenty five thousand making the monthly Debt Service 886 dollars so is that a good Debt structure well it depends on the net Income that takes us to step four which is to calculate the Cash Flow now

take a look right here at the Cash Flow analysis it shows the noi of 1746 and The Debt Service of 886 for a net Cash Flow of 861 which is pretty good so remember I said that the creativity is in the Debt structure well watch what

happens to the Cash Flow if I change the interest rate to three percent that made the monthly payment lower which increased the Cash Flow to 1051. let’s say I changed the interest rate to eight percent that means the payment go up and brought the Cash

Flow down to 536 and let’s say that I leave the interest at eight percent but I change the length of the Loan from 30 years to 50 years that made the payment lower which brought up the monthly Cash Flow to 626 so as you can see using my calculator

you can manipulate the numbers to create a favorable deal now let’s put this back to 30 years and five percent interest giving us 861 dollars in net Cash Flow assuming the seller were to agree on these terms step five is to calculate your wholesale fee now the question

everyone should be asking is how much can you wholesale this deal for before I answer that I want you to put yourself in the cash buyer shoes what would be your biggest concern when looking at this deal well I can tell you a cash buyer is going to care about the entry fee in this case forty six

thousand dollars and the monthly Cash Flow in this case 861 dollars now obviously the lower the entry fee the more desirable but I found that as long as the entry fee is under 25 of the total acquisition you won’t have any issues finding a buyer in this case the entry fee of

45 000 is 22 of the acquisition cost of 210 000. by the way the annual cash on cash return on that 45 000 entry fee that is creating a ten thousand dollar annual Cash Flow is 22 percent which is amazing so the cash outlay with the entry fee that’s in check so how much will an

investor be willing to pay for this deal well as of this recording in today’s market you can get two thousand dollars for every hundred dollars in monthly Cash Flow so if the net monthly Cash Flow is 200 a month you can get a four thousand dollar wholesale

fee with this example 861 dollars in monthly net Cash Flow would get you a seventeen thousand dollar assignment which my calculator automatically calculates for you based on the adjusted Cash Flow and there you have it that’s my five step process to wholesale

creative financing deals now you’ll notice right here there are two tabs one is for seller financing and the other other is for subject two let’s take a quick look at the subject to calculator the rent analysis Cash Flow analysis and so on are the same but the purchase

and acquisition looks a little different so for example if the seller is behind on payments there may be a reinstatement fee but otherwise the overall analysis is pretty much the same and I do want to point out that the cells in green are formulas so you don’t want to override them or

you’ll mess up the calculator also I recommend that you save a version as a Master Copy and then make a new worksheet for each property you analyze now finally if you like this calculator I’ll give it to you for free just go to creativefinancingcalculator.com for giving this to you for

free all I ask is that you leave a comment and say thanks Jerry you are flipping genius now finally if you like this calculator be sure to check out my new cash offer calculator that doesn’t require comps or estimating repairs I did a CashNews.co all about it so watch that now and I’ll

see you on the next CashNews.co