Creative Real Estate Investing with Augie Byllott - National REIA University, Module 1
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http://nationalreiau.com This is Module 1 of Introduction to Creative Financing for Real Estate Investors. My name is Augie Byllott and I help people buy and sell homes and investment properties in all price ranges without using lots of cash or credit. When I buy, I can pay all cash or with terms. When I sell, I don’t require large down payments or long approval periods. I also help others learn to do this too. When people ask me why, I respond, “because it’s fun and it’s a way to pass on to others what my teachers and mentors passed on to me.” We are about to embark on a journey into the world of Creative Financing for Real Estate Investing. During our journey you will learn about many tools, methods, strategies, and techniques for buying and selling houses without bank financing. You won’t even need lots of cash or your own credit. Our three primary areas of focus will be: Understanding Money Financing Techniques Exploring Sample Transactions to demonstrate the use each technique When it comes to investing in real estate, a good friend of mine says, “It’s not math, it’s money!” And he’s absolutely right. This is a money business, and the properties are simply a vehicle used to produce income and generate profits. Real estate investors who build serious wealth realize they’re not simply in the house business, they’re in the money business. This is why Creative Financing is such a timely subject. In Module 1, you’ll learn… How to create win-win multiple-offer scenarios Why the “old formula” for success doesn’t work any more An easy way to calculate how long it will take to double your money invested Why real estate is the “IDEAL” investment
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Creative Real Estate Investing with Augie Byllott - National REIA University, Module 1
- 1. Creative Finance for real estate investors Module 1 with Augie Byllott
- 2. Ironic, don’t you think?
- 3. Build Wealth & Create Income (And Help Others While Doing It)
- 5. house sitting on Market with no offers Owned home Free and clear Moving out of the area
- 6. Create and present offers OFFER 2 $5k now, $450/mo, $60k price
- 7. OFFER 2 $5k now, $450/mo, $60k price
- 8. The final numbers income $79,900 expenses $42,000 $800 $5,600 $2,000 $1,500 Sales Price Purchase price Clean-Up Sale Expense/Commission Closing costs Lender Interest Net profit= $28,000
- 9. Seller Wins Buyer Wins Lender Wins Agent Wins Investor Wins
- 11. a mind Once expanded by a new idea will never return to its original dimension ~Oliver Wendell Holmes
- 14. The elephant
- 15. We are trained young
- 16. Hope fades
- 19. The old formula doesn’t work
- 21. Properties are vehicles used to produce income
- 22. Compound Interest is the most powerful force in the universe ~Albert Einstein
- 23. 72 Interest Rate = time to double money “Rule of 72”
- 24. $0.00 $200.00 $400.00 $600.00 $800.00 $1,000.00 $1,200.00 5 10 15 20 25 30 35 40 45 50 Future Value of a Dollar
- 25. $100/Month Adds Up $0.00 $200,000.00 $400,000.00 $600,000.00 $800,000.00 $1,000,000.00 $1,200,000.00 $1,400,000.00 $1,600,000.00 Interest Rate $692,327 15% $1,411,358 18%
- 26. 3%
- 27. Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. ~ Archimedes ~
- 28. What’s your annual rate of return? 50% 100% 200% 400% 24 Months 12 Months 6 Months 3 Months
- 29. the investment
- 32. Increase the tools in your creative financing tool kit
- 33. Be prepared (to make offers)
- 35. You control your destiny
- 36. In module 2…
Editor's Notes
- Hello and Welcome to National REIA University Online. This is Introduction to Creative Financing for Real Estate Investors. My name is Augie Byllott and I help people buy and sell homes and investment properties in all price ranges without using lots of cash or credit. When I buy, I can pay all cash or with terms. When I sell, I don’t require large down payments or long approval periods. I also help others learn to do this too. When people ask me why, I respond, “because it’s fun and it’s a way to pass on to others what my teachers and mentors passed on to me.” We are about to embark on a journey into the world of Creative Financing for Real Estate Investing. During our journey you will learn about many tools, methods, strategies, and techniques for buying and selling houses without bank financing. You won’t even need lots of cash or your own credit. Our three primary areas of focus will be Understanding Money, Financing Techniques and exploring Sample Transactions to demonstrate the use each technique.
- You know, it’s ironic; the dream of my parent’s generation was to pay off a mortgage. The dream of my son’s generation is to get one. Banks and their policies can shackle us. Many people believe the only way you can purchase a house is with a bank mortgage, and it’s easy to get trapped into that way of thinking.
- On this journey, I’ll show you what Creative Financing is and how it can help you buy real estate,… sell real estate,…and build wealth for you and your family. You’ll also learn how to create multiple streams of income and help others while doing it. They say a picture is worth a thousand words and I want to paint you a picture that illustrates the power of Creative Financing right away. Here’s the deal:
- A Seller contacted us; he had his house on the market for a year and hadn’t received one offer. We inspected the house – nice neighborhood and the house needed only minor repairs.
- His house was free and clear (no mortgage) and was asking $100,000, which was the market price. He was moving out of the area and needed to sell. We gave him 3 offers:
- 1. $80,000 no money down, $500 a month until paid 2. $60,000 with $5,000 down and $450 a month until paid 3. $40,000 all cash
- We thought he’d take the first offer of $80,000 as it was closest to his asking price; but to our surprise, he took the all-cash offer as long as we also paid his back property taxes of $2,000. We contacted a private lender and borrowed $48,000 (to cover the purchase price, back taxes, closing costs, monthly holding expenses and repairs) at 12%.
- Purchase Price $42,000 cash Private loan $48,000 ($4,000 profit in advance!) $800 for clean-up and yard work We sold the house less than 2 months later for $79,900. We gave the Selling agent a 4% commission rather than the customary 3% to get extra exposure to the market, we spent $800 in repairs, and helped the buyer with their closing costs. Sales Price of $79,900 Concessions: 4% commission + 3% toward buyer’s closing costs of $5,600 Closing costs, buying and selling, of $2,000 Lender interest $1,000 plus $500 bonus
- So let’s look at who won in this transaction. (show full slide) How much of our money was in this deal? Zero, zilch, nada, zip! We purchased this property creatively, using what I refer to as “Intellectual Capital.” This is just one of many examples you’ll see in this program of how to buy, and sell, creatively.
- Our goals for this program are to provide you an understanding of creative financing; the skills to negotiate it, and the ability to see money in a new wayso that you can do deals just like this one! And that’s exactly what you want, isn’t it? My name is Augie Byllott and I currently live and work in Central Florida. Many years ago, I was a licensed real estate agent in New York State. This was back in the days of 14% interest rates.I worked very hard on every deal, and I saw many dollars changing hands…and I was left with a really small piece!Real estate was a 2nd job for me while I worked full-time. My first investment property was one that I lived in and converted it into an investment. A savvy broker introduced me to transacting deals as an investor. Once I saw the potential, I was hooked
- Oliver Wendell Holmes said, “A mind once expanded by a new idea will never return to its original dimension.” That’s what we have for you, new ideas, new ways of looking at things that will expand your range of possibility and profit! So, let’s begin our journey!
- Here’s something I want you to look at. What do you see? A one dollar bill? A medium of exchange? 100 cents? Paper with ink on it? I see an employee! If I can get enough of these little guys working for me, then I won’t have to. When we labor for money, we have 24 hours a day to earn, sleep and live. When we learn to leverage capital (money), we can expand that 24-hour earning potential many times over.
- Before we continue, there are a couple of questions I’d like you to think about in regard to the value of learning about Creative Real Estate investing: First, what would it be worth to you to be able to buy one more investment property per year? Second, when you become successful, you’ll be a winner and when you do, who else wins with you? What is it that prevents most people from achieving their dreams? Why is it that some folks excel while other can’t seem to get started.
- If the person who can’t get started sounds familiar to you, you might be surprised to learn that they have something in common with the largest land mammal on the planet, the elephant. I’ve always been amazed at how a small rope, tied to a peg driven into the ground, can keep a 12,000 pound pachyderm in place. Believe me, you don’t just go into the jungle, capture a 6-ton bull elephant and tie him to a wooden stake
- These animals at the circus have been trained; conditioned over a long period of time, sort of like our own childhood. You see, when still a baby, the elephant is tethered by a very thick rope to a stake firmly hammered into the ground. The baby elephant tries several times to get free, but it lacks the strength to do so. After some time, the animal gives up trying, believing that it will never be free.
- At this point, the trainer changes the thick rope to a thin one… but the elephant makes no attempt to run away… Even when the elephant reaches adulthood, it continues to be tethered by a thin rope,… reconciled to its captivity because it believes that since it couldn’t break away as a small elephant,… it still cannot.
- As you grew and gained experience, you established beliefs and attitudes that shaped your life and limited your choices. They are similar to the elephant’s thin rope tied to a post. You can break away from them with a simple tug if you want to, but you don’t. We go through life gaining more and more experience, our collection of assumptions, attitudes and beliefs grows too;… and… can further limit our choices. Our beliefs can become a serious hindrance to our ability to succeed Now wouldn’t it be great to change this model?
- That’s what I want to help you do in this course. Change your paradigm, your beliefs about what is possible for you. I want to teach you about out-of-the-box thinking. As a matter of fact, one of the nicest compliments a student has ever paid me was when she asked me of I ever thought “inside” the box? I responded…what box? Most people work for money; trading hours for dollars while the wealthy have money work for them; usually in the form of income producing assets. Income producing assets earn you money even while you’re sleeping. I don’t advise trying that on your job.
- If you’re like me, you were raised to believe that if you went to school, worked hard, got good grades, you’d get a good job. Then you’d continue to work hard on the job, get raises, get married to Prince or Princess Charming, have a family, buy a house and live happily ever after until retirement and then collect a pension. That formula may have worked a generation or two ago but it has passed its expiration date. The world moves much faster these days; people get 7 to 10 good, or not so good, jobs in a career… if they‘re lucky. And a pension? Not too likely any more. Welcome to the age of the entrepreneur!
- Entrepreneurship isn’t easy but it’s the only place I know where you have the potential for total freedom, complete responsibility and earn what you are truly worth! Getting everything you want is possible if you are just willing to take the time to learn how to get it!
- When it comes to investing in real estate, a good friend of mine likes to say IT’S NOT MATH, IT’S MONEY! And he’s absolutely right! This is a money business. The properties are simply a vehicle used to produce income and/or generate profits ”Real estate investors who really build wealth realize that they're not simply in the house business, they're in the money business.” This is why Creative Financing is such a timely subject. Exploring the math equates to the creation of money.
- Albert Einstein said it best, “the most powerful force in the universe is compound interest.” Let’s take a closer look at what that means…
- The Rule of 72 is a simple formula that will tell you how long it will take your money to double based on an interest rate. As an example, if I buy a bank CD and it pays 2% interest annually, I divide 72 by the 2% and it will take 36 years to double my money. Let’s say I want to double my money in ten years, what rate of return do I need? To find out simply divide 72 by the number of years, in this case 10. A 7.2% annual yield to double my money in 10 years. When I do seminars, I like to play “What’s Your Number?” I ask people how many years they plan on working before retiring. This is a way to get an idea on how to create a wealth-building program. I usually get responses ranging from 15 to 50 years.
- Here is a chart that is broken into 5-year increments and it assumes you can generate a 14% rate of return. It basically shows you the future value of a dollar invested today. While 14% may seem like an extremely high rate of return, and it is, we’re going to be discussing the use of leverage and how it can significantly increase investment returns. BRING UP CHART What’s a Dollar Worth? ►YEARS 14% ► 5 $ 2.00 ►10 $ 4.00 ►15 $ 8.00 ►20 $ 16.00 ►25 $ 32.00 ►30 $ 64.00 ►35 $ 128.00 ►40 $ 256.00 ►45 $ 512.00 ►50 $1,024.00 Once you have this information you’ll know the potential of every dollar you spend today rather than investing it! Poor people spend while wealthy people invest. Spent money is gone while invested money produces income to spend.
- Here’s another way to look at wealth building: Could you find a way to save $100.00 a month? If you did…what could you do with it? Let’s say you invest it effectively; How much would you accumulate if you invested that $100 a month for 360 months at 15%? $692,327.96 How much would you accumulate if you increased your return by 3% to $18% over the same period? $1,411,358.54
- I know you’re thinking 18%, that’s an unfathomable return. That’s because you’re still thinking inside the box. The difference between 15% and 18% is only 3%...that doesn’t seem like much, right? But consider if you were sailing to Europe from New York. A 3% error in direction would land you in Africa instead! The effect of even small changes gets amplified over time.
- What was my rate ofreturn on that transaction where we made $28,000 with no money invested in the deal? Effectively it is infinity. No one can make 18% on every investment however, averaging up is possible. Let’s look at the following chart:
- What’s Your Annual Rate of Return? If you double your money in 24 months? 50% If you double your money in 12 months? 100% If you double your money in 6 months? 200% If you double your money in 3 months? 400% 400%? Wow that’s amazing,… isn’t that the same return I would have gotten had I put $14,000 of my own money into the deal where we earned $28,000?... Since I had no money in the deal the return was even greater! Its what’s known as leverage, one of the most powerful benefits of creative real estate investing. We’ll look leverage more closely in just a moment.
- Real estate has been called the I D E A L investment because it is a single investment with numerous benefits. The “I” in IDEAL represents Income. It comes from many possible sources… rents, option fees, sale proceeds, application fees, late fees, extra tenant fees, loan payments, and interest payments among others. Real estate investments that are properly structured will generate positive cash flow. As time passes, in most markets,… even a highly leveraged, negative cash flow property can turn into a positive cash flow investment.
- Here’s an example: Let’s say you purchase a $100,000 property for cash. In twelve months you sell the property for $110,000. You would have made a cash-on-cash return (the money made on the $100,000 of cash you invested) of 10%. Your $100,000 cash purchased the right to control a $100,000 asset since you used all 100% of it to purchase the property.
- Let’s take it a step further. Instead of putting all the cash into a single property like we did before, let’s leverage the $100,000 as down payments on 10 houses. We put 10%, which is $10,000, down on each $100,000 house. This time, your cash-on-cash return is 100%, and you would have yielded $100,000. AND, you would control $1,000,000 in assets! So there you have it, real estate is the I D E A L investment and when you learn how to purchase it creatively, you can generate Income, benefit from Depreciation, build up Equity, maybe enjoy some Appreciation, all while using Leverage. The key is to learn how to do it safely and manage, or better yet, minimize your risk.
- Have you ever been unable to put a deal together with a seller and then another investor who’s not even as smart as you buys the house? How did that feel? It used to happen to me and I have to admit…it used to ticked me offuntil… I increased the number of tools in my creative financing tool kit.
- One of many techniques you’ll learn in this program is how to create multiple offers, so thatSellers, and Buyers, feel compelled to work with you.
- Are you an investor looking to grow your business? Or are you here to rebuild your retirement portfolio after being devastated by the stock market… maybe you see real estate as a more controllable alternative? Perhaps you’ve been downsized and need to create some additional income or simply start a new career. Are you a single parent struggling to make ends meet? Or are you just plain sick and tired of being sick and tired? Whatever your reason is for being here, you’ve made a great choice; you are in the right place at the right time!
- Imagine you take all this training and acton it. Now… you’re the one people are asking, “Hey, how’d you do that deal?” What will that feel like at your next REIA meeting… when people ask you for guidance? Can you imagine how great you’ll feel when your closing ratio goes up,… along with your bank balance?
- In the next leg of our journey, we’re going to take an expanded look at the idea of financial leverage, stair-stepping your way to safety on seller financed deals, the restrictive nature traditional financing and limitless flexibility of creative real estate. And, we’re going to explore a deal that is producing equity at an amazing rate of speed! So, be sure to join us as we continue our journey through Creative Financing for Real Estate Investors. Til then, I’m Augie Byllott wishing you profitable transactions!!!