Epic Real Estate Investing - Contract for Deed | Real Estate Investing for Beginners | 1012

Episode Date: May 8, 2020

It’s never a money problem that holds you back but rather an idea problem! Creative real estate investing means that you use ideas in a place of money! Hence, Matt shares how to use an agreement for deed in your creative real estate investing as well as explains the advantages of this contract over a traditional bank loan! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

The word creative in creative real estate investing means you're using ideas in place of money. As a real estate investor, contrary to popular belief, it's never a money problem that's going to hold you back, but rather an idea problem. You see, you don't need a lot of money to invest in real estate. You just need a lot of ideas. And we refer to these creative ideas as terms. Terms like equity sharing, options, lease options, agreement for deeds, seller carryback, subject to, wraps, all-inclusive trust deeds and so much more.

But right now, I'm going to show you how to use an agreement for deed in your creative real estate investing. This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helped. helping real estate investors do just that for more than a decade now.

If you want to make money in real estate, keep listening. If you want it faster, visit r-e-i-a-aise.com. Here's Matt. An agreement for deed is a form of creative financing, specifically a form of seller financing. Instead of getting a loan from a bank and making payments to the bank, the seller steps in place of the bank, gives you the loan to buy their property and then you make payments to the seller.

Other than that, they're essentially the same with one major difference. When buying a property with a traditional mortgage, you get title to the property and then make payments. With an agreement for deed, you make payments and then get title. It's like buying a car. The dealer gives you the car to drive, you make the payments, and when you've made your last payment, you get title to the car. This works just like that. You'll hear agreement for deed also referred to as a land contract.

contract, contract for deed, bond for deed, and installment land contract. It all depends on what state you're buying in, but basically, they all do the same thing. Now, although you're not initially on title when you make your purchase with an agreement for deed, there are valuable rights passed on to you as the buyer. These rights are called equitable rights and equitable title, which give you the rights to use the property and prevents the seller from entering a similar or the same agreement with someone else. The agreement is a legal enforceable document. But for a couple extra levels of security for yourself, you're going to want to, one, record the contract or a memorandum of contract with the city.

This cloud's title and makes it almost impossible for the seller to further encumber the property with any additional financing that may or may not interfere with your agreement. And two, escrow the warranty deed. Have the warranty deed held an escrow with instructions for when you make the final payment to give it to you? In the event the seller disappears. It happens. Or they have a change of heart. Or they experience some legal or financial trouble that will interfere with you getting title. You don't have to wait on or chase the seller down after you've done your part.

Now, there are several benefits to you as the buyer in purchasing a property via an agreement for deed. First, you get control of a property. As we discussed in the last lesson, the name of the get wealthy and real estate game is control. Second, you assume less risk than paying all. cash or taking out a recourse loan. Third, no bank qualifying. Fourth, more flexibility dealing directly with a private seller. And then fifth, preserves your conventional buying power in the future since you're not on title.

Now, benefits to the seller are, first, it's a lower risk structure considering they remain on title. This makes it much easier and less expensive for them to get their property back should you default on the payments. Second, they can get a higher price for their property and earn interest on that sale. Third, they reduce their closing costs. Fourth, they have no more maintenance responsibilities on the property. And fifth, if they have a mortgage on their property, their payments are now covered. They get mortgage relief. One of the key factors in an agreement for deed is the interest rate.

This factor determines the amount of the monthly payment and the amount of equity that builds up. If you have a low interest rate, the amount of your payment going toward the principal is, increased, thereby building your equity. With that said, the key components you'll want to negotiate are the purchase price as low as possible, the down payment as low as possible, the monthly payments as low as possible, the interest rate as low as possible, and the maturity date. This is when the principal amount per the agreement becomes due, and you want to negotiate that as far out as possible. Here's what makes creative financing in this manner so much more fun. You see, when you borrow money from a conventional bank to buy a property. They present the terms of the loan to you and you have

two options. Take it or leave it. That's what you call uncreative financing. Every loan has dozens of terms at play and you can be sure that a conventional bank has stacked every single one of them in their favor. But when you're dealing with an individual negotiating creative financing, the terms are much more flexible and can be a lot more beneficial to you. You can be a lot more beneficial to you. probably won't get everything you ask for in every transaction, but you can get a whole lot more than you'll ever get negotiating with a loan representative in the mortgage department of the bank, within a division owned by a corporation that's a member of a conglomerate that answers to Wall Street. Dealing directly with a private seller is just better for both you and the seller,

really. For a free list of 21 creative terms you can negotiate for in your deals, Download the same creative financing cheat sheets I give to my private RIAEACE clients at Epicbreakthrough.com. Some of the other things you'll want to negotiate for are, one, the ability to alter the property. I mean, if you see an opportunity in improving or adding to or rehabbing the property, you want to be able to do that. Two, the ability to lease. Protect your right to lease the property. Most standard agreement for deed contracts seem to maintain the underlying assumption that the contract buyer will be residing at the property. Thus, they tend to prohibit leasing and subletting. Three, installment payments.

It's not unreasonable to defer payments, especially if the property is vacant or a fixer-upper. You may ask the seller to defer the payments for a number of months, and that request can be justified by telling the seller your money will be spent fixing, maintaining, and or marketing the property so that you can afford to make the payments to them. Like any other investment purchase, what you get will be in direct proportion to, what you ask for and the seller's motivation. Having said all that, when you reach an agreement with the seller, it's best to have your own attorney draft your documents or at least review them.

There are too many what ifs in a transaction like this to trust forms that are general in nature. As they touched on in the last lesson, and earlier here even, the name of the real estate game is control. And there are many ways to get control of property. And we're going through a bunch of them one by one, but all levels of control are not created equal. There is a ranking of control, if you will. Each level of control that you step up essentially gives you more flexibility and options and how you can profit from a property.

The first level is an assignable cash deal, like a signed assignable purchase agreement with a seller or an assignable option to purchase. The second level would be your lease option. And the third level would be the agreement for deed we just covered. Meet me in the next lesson and I'll reveal the fourth and final level of control, which gives you the most options for profit. I'll see you next day. Yeah, yeah, we got the cash flow.

Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know, home board, we got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.