Subto + Seller Finance (Hybrid) - Masterclass Video 6 w/ Pace Morby

TL;DR

This video discusses a unique strategy called a hybrid between a subject-to loan and seller finance, which is useful when a seller has extra equity on top of existing debt.

Transcript

okay guys welcome back Pace awesome here we're I don't know how deep we are in the series now but we've been doing a ton of videos all creative financing and on this video specifically we're going to talk about a unique strategy which is a combination of subject two and there's Equity so how do you cover that extra Equity guys if you've missed any ... Read More

Key Insights

• 🏢 Hybrid strategy combines subject two and equity. It is a common strategy when a seller has extra equity on top of existing debt. Wraps should be avoided when structuring creative financing deals.
• 📚 Telling stories is a powerful way to simplify and explain creative financing strategies to sellers and other parties involved in the deal. Facts tell, stories sell.
• 🔑 Understanding lean positions and priority is crucial when structuring creative financing deals. This includes sub two loans, seller finance notes, and third-party loans like private money lenders.
• 🏨 Example of a hybrid strategy in a hotel deal: Taking over the existing loan and creating a zero-interest seller note for two years, followed by eight percent interest in the third year.
• 💼 Private money lenders can be used to fund the renovation costs and other upfront expenses in a creative financing deal. They can take a third or fourth position on the property.
• 🛠️ Creative financing opportunities are abundant and there is no end to these types of opportunities. The key is to be a transactioneer and understand and utilize the various strategies under the creative financing umbrella.
• 🔧 Puerto Rico offers a tax credit incentive for hospitality investments, making it a lucrative market for creative financing deals. The tax credits can be sold for additional profit.
• 🔒 Acquiring a deep understanding of creative financing tools and being able to explain them effectively to sellers is crucial for success. Taking massive action and implementing these strategies is key.

Questions & Answers

Q: How does the hybrid strategy work in acquiring properties with existing debt and excess equity?

The hybrid strategy combines a subject-to loan and seller finance. The buyer takes over the existing debt, such as a mortgage, while creating a separate seller finance note for the excess equity. This allows the buyer to acquire the property without having to come out of pocket for a new loan.

Q: What is the difference between a wrap and a hybrid strategy?

A wrap occurs when a seller wraps their existing debt around the property and charges a higher interest rate to the buyer. In a hybrid strategy, the buyer separates the sub-2 loan and seller finance note to ensure the sub-2 loan remains clean with the existing low-interest rate.

Q: How can storytelling help in explaining creative financing strategies?

Telling stories about how these strategies have been successfully used can help sellers, agents, and lenders who may not have a background in real estate or creative financing to understand the concepts better. Stories make it easier for people to grasp unfamiliar ideas and increase the likelihood of them agreeing to the strategy.

Q: What are the benefits of using private money lenders in creative financing deals?

Private money lenders can assist in financing the down payment, closing costs, and other expenses involved in the deal. They may provide loans in third or fourth positions, allowing the buyer to secure the property with minimal personal funds.

Q: How can the hybrid strategy be applied to commercial properties?

The hybrid strategy can be used in commercial properties, such as hotels, where a seller has excess equity on top of an existing loan. By utilizing a subject-to loan and seller finance note, the buyer can acquire the property while keeping the low-interest existing debt and creating a separate note for the excess equity.

Answer: The hybrid strategy is a versatile and powerful tool in creative financing, offering opportunities to acquire properties with existing debt and excess equity. By understanding and explaining this strategy to sellers, buyers can negotiate favorable terms and create win-win situations with minimal personal funds. Through storytelling and taking action, buyers can unlock endless possibilities in their real estate journey.

Summary & Key Takeaways

• The video focuses on a unique strategy called a hybrid, which combines a subject-to loan and seller finance.

• This strategy is commonly used when a seller has additional equity on top of their existing debt in various types of properties.

• The video provides examples and stories of how this strategy can be implemented, emphasizing the importance of understanding and explaining the strategy to sellers.