Non-conventional Financing

Most common forms:

①  Seller Financing

②  Hard Money Lending

③  Private Investor

④  Joint Venture Partner

Non-Conventional Financing

Ø  Also called VTB or seller carryback loan Ø  Asset based loan Ø  Creativity and Negotiation a MUST!

Seller Financing

Pros •  You don’t need to borrow the full amount from the bank •  Deal is quicker and cleaner •  Your credit and employment not a big issue

Cons •  High than bank interest rate (5-7%) •  Rare for residential

Variations of Seller Financing

•  Seller carries the promissory note and mortgage for the entire balance of the home price, less any down payment  

All-inclusive mortgage  

•  Land contracts don't pass title to the buyer, but give the buyer "equitable title," a temporarily shared ownership  

•  After the final payment the buyer gets the deed

Land contract  

Variations of Seller Financing

•  tenant pays a lump sum to owner for the option to purchase the property in the future  

•  some or all of the rental payments can be credited against the purchase price.

Lease Option  

Sandwich Lease

Option  

Most common forms:

①  Seller Financing

②  Hard Money Lending

③  Private Investor

④  Joint Venture Partner

Non-Conventional Financing

Ø  Asset-based lending Ø  Short-term loans Ø  Can be a second mortgage

Hard Money Lending

Pros •  Backed by the value of the property, not the

value of the borrower •  Can be available quickly

Cons •  Highest interest rate of all loans •  Have lower loan-to-value (LTV) (50

-65% max) ratios than traditional loans •  High admin Fees

Hard Money Loans My Deals

Ø  $35,000 HELOC @ 3.5%

Ø  Lent it out to two borrowers, $25,000 and $10,000 @ 12%

Ø  $3,000 admin fee per deal ($1,000 to writing agent)

Ø  Received back $27,000 and $13,000

Ø  $4,000 in Fees in 5 weeks

Most common forms:

①  Seller Financing

②  Hard Money Lending

③  Private Investor

④  Joint Venture Partner

Non-Conventional Financing

Ø  Requires a return on their money, not equity

Ø  Requires YOU to be experienced, prepared and organized

Private Investor

Pros •  Asset based lending

Cons •  High interest rates @ 10 – 12% •  High competition

Non-Conventional Financing

Private Investor

Don’t forget the RSP Mortgage!

RESP: Registered Education Saving Plan RRIF: Registered Retirement Income Fund TFSA: Tax Free Savings Account LIRA: Locked-in Retirement Account

Most common forms:

①  Seller Financing

②  Hard Money Lending

③  Private Investor

④  Joint Venture Partner

Non-Conventional Financing

A business undertaken by two or more individuals or companies in an effort to share

risk, use resources, time, knowledge, and differences in expertise for a common goal

Joint Venture Partnership

Ø  Equity share

Ø  Max 50 investors in Ontario

Joint Venture Partnership

Pros •  Unlimited deal combinations •  Leverages everyone's strengths •  Unlimited deals

Cons •  You give up equity •  More than one decision maker

JV Partnership Blueprint

Generate Leads

The Pitch

The Proposal The Transaction

The Payout & Repeat

Ø  Initial Contributions Ø  Responsibilities Ø  Profit Share Ø  Cash Calls Ø  Exit Strategy Ø  Early Exit options

JV Partnership Agreement

JV Partnership Contributions

Money

Contacts

Experience

Knowledge

Time

Skill

Partner 1 Partner 2

JV Partnership Contributions

Money Contacts Experience Knowledge Time Skill

Partner 1 Partner 2

JV Partnership Contributions

Money

Contacts Experience Knowledge

Time

Skill

Partner 1 Partner 2

JV Partnership Contributions

Money Contacts

Experience

Knowledge

Time Skill

Partner 1 Partner 2

JV Partnership Contributions

Money

Contacts

Experience Knowledge Time

Skill

Partner 1 Partner 2

JV Partnership Contributions

Money Contacts

Experience

Knowledge

Time

Skill

Partner 1 Partner 2

JV Partnership Contributions

Money

Contacts Experience Knowledge

Time

Skill

Money Time

1.

2.

3.

The Prestige Plan

JV Partnership Contributions

Contacts

Experience

Knowledge

Skill Money

Time

20% Private investor

65% Seller holds note

15% Personal cash

Creative Financing Deal Structures

20% Private investor

65% Mortgage

15% Personal cash

Creative Financing Deal Structures

15% Private investor

65% Mortgage

20% Personal cash

Creative Financing Deal Structures

15% Private investor

65% Seller holds note

20% Personal cash

Creative Financing Deal Structures

90% Seller holds note

10% Personal cash

Creative Financing Deal Structures

6 ways to do a “No Money Down” deal

20% Personal Income LOC

80% Mortgage

Is 100% Financing Possible?

6 ways to do a “No Money Down” deal

20% Private Investor

80% Mortgage

Is 100% Financing Possible?

6 ways to do a “No Money Down” deal

25% Business Partner Income LOC

50% Seller holds note

25% Personal Income LOC

Is 100% Financing Possible?

6 ways to do a “No Money Down” deal

100% Mortgage

Is 100% Financing Possible?

6 ways to do a “No Money Down” deal

100% Private Investor(s)

Is 100% Financing Possible?

6 ways to do a “No Money Down” deal

100% JV Partner(s)

Is 100% Financing Possible?

Ø Seller Financing

Ø Hard Money Lending

Ø Private Investor

Ø Joint Venture Partner

Four New Financing Tools