OWNER-FINANCING TO INVESTOR
Anticipate investor questions by documenting everything: neighborhood rent reports, ren- ovated items, inspection reports, tenant qualification paperwork and property management information. Your investors will certainly want to see that information and having it all
AMOUNT FINANCED
MONTHLY PAYMENT
RATE
TERM
$27,500
6.25%
$459
6 YEARS
available will show that you are professional. NoteSchool, through its Turnkey Flipping Academy, has invested countless hours of strategic planning and was able to engage national vendors in all steps involved in providing turnkey rental properties to indi- vidual investors nationwide. We have a vendor for neighborhood rental reports, access to discounted non-performing notes and REOs, nation- al property preservation and renovation, national turnkey cash buyer lead list with a complete marketing program, a national seller to follow up on your marketing leads, and even closing assistance for creating the seller-financed note. This vendor network gives individual investors the same access to national vendors as the large multimillion-dollar firms. It is what allows the small investor to unlock this opportunity and build a scalable national business. It is a true game changer that levels the playing field. For over 35 years, I have worked with real estate investors through both Co- lonial Funding Group and Note School. That same foundation of innovation and industry leadership can be found in Colonial Capital Management, the Sell- er Finance Coalition and NoteSchool’s Turnkey Flipping Academy (TFA). For more information, go to www.turnkeyflippingacademy.com. •
CONCLUSIONAND GAME CHANGER The demand for turnkey rentals is very strong, and every indicator shows that the trend is likely to continue into the foreseeable future. The time to make this a part of your overall investment plans is now. The best investment is ful- filling a demand by creating solutions to market inefficiencies. This turnkey model does not work on every property. It is best to apply the model and calculations before pur- chasing the property rather than after purchasing the property and trying to force it into this model. Although seller financing is the perfect solution for lower price band properties, you do not have to use seller financing on every property. Third-par- ty financing works on more expensive properties and all-cash works as well. Always keep the end product in mind. If you will be providing a seller-financed turnkey rental investment property, make sure that the projected numbers work for both you and the cash investor. If third-party financing is available, run that scenario as well. A full cash option can always be added to a lower or higher price band transaction. Although this model works anywhere, if you are going to build a scalable investment business out of it, focus on strong rental markets in the Midwest and Southeast. The monthly rent on the property should be greater than 1 percent of the after repaired property value. For example, if the property is worth $55,000, the rent needs to exceed $550 per month for the turnkey model to work.
rental market in the country is producing a 7.3 percent return! If we apply seller financing for this investor, the cash-on-cash return will be even higher. In this example, the sales price was $55,000. Seller financing is a real game changer in this investment vehicle. Traditional banks and other lenders are not active in this space and therefore a lending void is left in the market. At NoteSchool, our executive team has purchased more than $2.5 billion in seller-financed notes over the past 35 years and our experience shows that when the banks say “no,” seller financing immediately fills that void. Based upon the monthly NOI, if an investor put 50 percent down, we could offer to finance the balance at 6.25 percent for 6 years. This way the tenant is essentially paying for half of the pur- chase, and the cash investor will own it free and clear in 6 years. If the cash investor put less down or wanted a longer term or different interest rate, we could certainly create a different loan to fit the transaction. A turnkey seller who followed all of the six steps properly would make an even better return. In this example, the turn- key seller acquired the property through purchasing a non-performing loan and receiving a deed in lieu of foreclosure. Once acquired, he renovated the property and was all-in for $20,237. The down payment of $27,500 provid- ed by the cash investor covered the entire expense and about a $7,000 profit upfront. In addition, the turnkey seller receives a passive $459 per month for 72 months secured by the property!
Eddie Speed is the founder of Colonial Funding Group and NoteSchool. He is an expert in seller financing and the nonperforming note industry and is sought-after as a coach, mentor, speaker and author.
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