Creativity Rules!

So far, the stats say the most read story is the one on the no money deal. So if you liked that, you’ll love this. This story was one of the more creative deals we’ve ever done. Remember that traditional financing is only one of many ways to get the job done. One of the biggest obstacles is the down payment. (It amazes me that people want to invest but fall apart when something as insignificant as a down payment derails the whole dream of investing) If you want to be serious about anything in life, get used to the idea of committing time and resources to it!

Anyway, back to the deal. We were probably 2-3 years into our investing business and still trying to figure out how it all worked. This deal came to us at the end of the year and caught us in the middle of trying to scratch together enough cash to pay property taxes due at the end of December. The first principle is keep your eyes and ears open to opportunity. I was talking to a banker friend and he rolled his eyes slightly when I tried to make a clever comment about foreclosures. It took me by surprise a little and I asked him “What?” waiting for his response. He said he’d been dealing with a couple of them that were driving him crazy. As it turned out they had a property that was their property from hell. It wasn’t a bad property but everything they did with it seemed to backfire on them. It was a 2 bedroom house on an acreage that they had tried to sell and had one buyer after another fall through and they wanted it gone.

I went to look at it and then came back and told them I would make an offer if they would either accept it or reject it right on the spot. No “we’ll run it past the president or the board and get back to you”. My offer was about 40% of the appraisal. After about 5 minutes of negotiation they accepted an offer of about 45% of appraisal. Guess what, I didn’t have the money and worse yet I was still $1,500 short on having enough to pay the property taxes due in a month. BUT, the deal was too good. 30 days to make it work. ( I didn’t tell the bank I didn’t have the money. After all …… couple of weeks to work that out before closing)

I think this next part separates those who are serious from the rest. There was no way to get the remaining $1,500 for taxes and the $3,000 down payment needed by saving it up or earning it in that short of time. I went right out looking for a private investor willing to put up $5,000 at 9% interest for two years. I didn’t stop at one or two. I hit up every one I could think of. I found 3 willing to make the deal. The only problem was that none of them could get the money together before closing. I did get the loan contract together though so the money was committed, the timing just wasn’t working out.

When the closing day arrived, I took out a cash advance on a credit card to make the down payment. About a week later I got the $5,000 private “down payment” loan and repaid the credit card advance of $3,000, used another $1,500 of the $5,000 to finish paying off the property taxes. Then used the remaining $500 to get some Christmas presents for the family.

The rent we collected was enough to pay the mortgage, the private loan payments, taxes and insurance with about $30 left over each month. Once the down payment loan was paid off 2 years later, we had about $225 left over each month. This deal made a good investment the day we closed it and is still a productive investment today. Creativity Rules!

This deal worked so well for us that we began using it as a regular part of our investing program. Only now we offer 12% interest and will go as short as six months if needed or we will still do longer 2 or 3 year terms. We have deals like this going on nearly all of the time. The most important thing to get from this is that when you find your deal, you can find a way to get it done….. IF……you really want to bad enough.

 

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