by Eddie Speed

Being a successful entrepreneur in real estate investing is all about discovering voids and filling the gaps. The gaps in the market that need filling one year can be completely different than the ones in the year before. Creative financing is what fills those gaps for the challenges facing every deal you make.

At this point in the wake of the COVID19 financial beating, new voids have suddenly appeared that weren’t here just three months ago. I’m confident the economy
will recover. But will we have a V-shaped recovery that turns back up immediately, or a U-shaped recovery that gradually turns back up, or are we looking at an L-shaped recovery where things stay flat for a long time?

I DON’T HAVE A CRYSTAL BALL – I HAVE A REARVIEW MIRROR

In recent weeks, I’ve been doing 2 to 5 interviews every day for articles, podcasts, etc. Everybody is asking me to look into my crystal ball and foretell the future. And I wish I could! I tell them I don’t have a crystal ball—I have a rearview mirror. It gives me a clear view of the past, which can be just as valuable! The creative techniques I’ve developed, expanded, and perfected in previous downturns are being put to use to fill gaps in today’s market to save the day for thousands of investors.

I can honestly tell you that I’ve boosted my net worth more in weak markets than in boom markets. But I haven’t done it by taking advantage of people down on their luck, just the opposite. I’ve done it by HELPING people down on their luck using creative financing to fill the voids big institutions couldn’t fill. When buyers are being left behind, creativity makes deals come together instead of falling apart.

THE SUREST WAY TO FAIL IS TO BE SET IN YOUR WAYS

I think of the real estate business as more like a river than a pond. A pond can quickly turn stagnant, but rivers are always flowing and staying fresh. As the saying goes, you’ll never step in the same river twice. That’s why we’re constantly adjusting the curriculum in our Note School classes.

When I got into this business back in 1980, mortgage interest rates were a staggering 20% and I was calling on mortgage lenders and real estate companies. When I walked in the door it felt like I had walked into a funeral home. They had no ideas, no plans, and no hope. They were set in their ways and saw no way forward because they only knew how to do things one way. But because I had a different mindset and fresh perspective, plus a toolbox of creative techniques learned from my father-in-law, it turned out to be a
bonanza for me.

Creative financing also helped me thrive in 1986 after the huge savings & loan banking debacle that started in Texas and the Southwest, that caused the most loans to default since the Great Depression (and led to the formation of the Resolution Trust Corporation to liquidate the mountains of defaulted loans). It helped me thrive in the 1998 financial crisis when 8 of the top 10 financial institutions went belly up. It helped me thrive during the terrible downturn after 9/11 in 2001. It helped me thrive in 2008 when the Lehman Brothers subprime lending fiasco collapsed after loaning money to anybody who could fog a mirror, and financial powerhouses fell like dominoes.

I’m confident that creative financing is the answer to not just survive in 2020, but to THRIVE! Lots of real estate investors are finally seeing the beauty of creative financing. If creative financing was a lady, investors who would have rated her a 2 in January will be giving her an 8 in June!

LOOK FOR THE OPPORTUNITY HIDDEN INSIDE EVERY PROBLEM

Right now, the reason you see an empty shelf at the grocery store where the toilet paper used to be is because of a supply chain problem. Well, that’s not the only place where the supply chain has been disrupted. It’s also happening in the downstream flow of lending money.

The money flow starts when a warehouse facility lender supplies the money for banks and mortgage companies to lend. In turn, these banks and mortgage companies then loan that money to real estate wholesalers and rehabbers, as well as individual retail home buyers.

These loans must meet the guidelines and requirements of Fannie Mae, Freddie Mac, FHA, or other federally backed financial conduits who will eventually purchase these loans from the loan originator. But if those loans have some kind of a “glitch” (and there’s a huge range of potential glitches), then the loan originator has to buy them back in an “agency buyback.” At that point, the loan gets branded as a “Scratch and Dent” loan. (Right now, we are seeing 10X the normal number of Scratch and Dent loans.)

What happens to all these Scratch and Dent loans? The loan originator has to find somebody else to sell them to, and many potential downstream buyers have moved the goalposts by changing their criteria, or simply evaporated altogether. These agency buybacks cause the money to flow back upstream instead of downstream, so it causes a logjam that stops the money from flowing to close deals. (They are trying to sell those Scratch and Dent loans to me at 95¢ on the dollar, and when it gets down around 60¢ I’ll get serious about buying them.)

As warehouse lenders see the logjam downstream, they have become extremely limited in extending credit to banks and mortgage companies until they can clear out their inventory.

With banks and mortgage companies in turmoil, the neck of the funnel has narrowed so it’s harder for loans to squeeze through. The requirements to qualify for a mortgage have tightened up dramatically in recent weeks. Lenders are requiring bigger down payments, and a credit score for the retail buyer of 700 instead of 620. (We’re seeing way more buyers in the “penalty box” today than just 90 days ago.)

There is another problem. About a third to half of hard money lenders, who are private investors that normally lend to real estate wholesalers, have stopped lending money period. The ones still lending have significantly decreased their loan-to-value ratio. The end result is deals aren’t making it to the closing table and thousands of potential homebuyers are ultimately getting left behind.

BUT, all these problems have opened up a HUGE door for entrepreneurs who can structure deals with creative financing to fill the voids!

Let me give you one example. If a wholesaler can only borrow 70% from the private hard money lender, creative financing enables you to have the property seller finance the remaining portion of the deal with a “Piggy Back” second. Instead of using your cash for a big down payment, you can borrow 70% in a Hard Money first mortgage from your hard money lender with the remaining 30% coming from the seller who carries the financing instead of getting all their cash up front.

The seller gets paid out over time (so you are buying their equity with tomorrow’s dollars instead of today’s dollars), and the deal closes instead of falling apart. To help bridge the gap, “Piggy Back Seconds” are making a powerful comeback (I used them in a huge way back in the 1980’s).

Even though there’s a lot of uncertainty in today’s market, I’m confident that investors who understand creative financing will come out smelling like a rose on the other side. How do I know? Because I have trained 40 years for this party!


For more on this topic, please attend our ONLINE meeting on Monday, June 8th @ 5:45pm: AZREIA Phoenix Monthly Meeting


 

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AZREIA, Arizona Real Estate Investors Association, is a professional association that exists to serve the needs of independent real estate investors. We provide market information and analysis, education, networking opportunities, implementation guidance, and support to assist our members in achieving success in real estate investing. Since our founding in 2002, we have helped thousands of real estate investors.

  • We believe real estate investing can help anyone achieve their financial goals. Success is a process and real estate investing over the long-term can provide exceptional results. Your results are dependent on your commitment to success and the effort you put forth in addition to market factors both seen and unseen. Not everyone is willing to commit and do what is necessary (legally, ethically and morally) to succeed. We do not believe in “get rich quick”! Please take our FREE Entrepreneurial Self Assessment to better understand your suitability for real estate investing. It takes about 20 minutes.
  • We believe planning is an essential element to reaching your desired outcome. We feel our Launch Pad program for new investors is an exceptional planning process for new real estate investors that will keep you focused, take months off your development cycle and give you a much better opportunity for success. Launch Pad is available to everyone. It is available for AZREIA members at the small price of $30. Non-members may attend on a space available basis but pay a non-refundable $100 fee to attend.
  • We believe strongly in education and offer reasonably priced education both internally and from respected educators outside of AZREIA. We are not mentors or coaches. We do not offer these type of high cost programs.
  • We believe networking is critical to any investor’s success. Networking with a purpose will help you build or improve your team, understand how others are successful, learn different investing techniques, acquire property, find money partner and much more. We believe networking is the second most important aspect to successful investing falling only behind implementing a well thought out plan. In support of this belief, AZREIA offers several networking opportunities every month.
  • We believe an association should bring purchasing power to its members. AZREIA has exceptional benefits that save our members money, increase their profits and simplify their business.
  • We believe and enforce our strong Code of Ethics. (CLICK TO VIEW)

AZREIA is believed to be the largest REIA in the country. We have been the most highly recognized REIA by the National Real Estate Investors Association. No other REIA has earned the REIA of the Year Award as many times as AZREIA. Additionally, National REIA has recognized AZREIA’s education program, community program and Government Affairs program as the best. National REIA has also honored AZREIA as being the Most Innovative. Locally, the Phoenix and Tucson Business Journals have listed AZREIA among the Top 10 Professional Associations.

 

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Will real estate investing solve my problem?

Most people consider investing in real estate as a way to solve an issue or issues in their life. The good news is real estate investing can work for anyone. So, the quick answer to the question is yes, real estate investing is a good way to solve many financial issues.

The bad news is many times a person will not take the necessary steps to ensure success in real estate investing. So, while real estate investing will work for anyone, it will not work for everyone. If you are committed and take the necessary actions (legally, ethically and morally) your probability of success is very high.

We encourage all new investors to complete AZREIA’s FREE Entrepreneurial Self Assessment. This 20 minute exercise will help you determine if real estate investing is right for you. Also, you will understand the type of investing most suited to your personal situation. [CLICK HERE to take the Entrepreneurial Self Assessment] Based on your results, you may determine to complete Launch Pad.

At AZREIA, we have a path for all people considering real estate investing to follow as a way to get started and determine if real estate investing will work for you. We call it Launch Pad!

Launch Pad is a planning process that when completed provides most new investors with the following:

  1. Your Optimal Investing Path
  2. Your Preferred Property Type
  3. Your Property Acquisition Plan
  4. Your Funding Plan
  5. Your Educational Plan
  6. Your Team Building Plan
  7. Your Networking Plan
  8. Your Beginning Timeline

We’re sure you noticed that each one of the above eight items begins with “Your”. That is because every investor is different. Your needs are unique to you, so your plan needs to be specifically designed to meet those needs. Also, your plan should fit in with your current life situation.

Here’s the kicker…. Going through the Launch Pad process will also determine if real estate investing will work for you at this time in your life. If so, great! You have a plan to implement. If not, isn’t it better to know that up front and save you a lot of time, money and anguish? At that point, you can consider other ways to solve the problems you are facing.

Consider registering for our next Launch Pad session. You will need to set aside about four hours to complete the process. If you are an AZREIA member, there is a small $30 fee for Launch Pad. Non-members may attend on a space-available basis but pay a non-refundable $100 fee to attend.

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New to Real Estate Investing: How AZREIA Membership Helps Me

Congratulations! Just knowing that real estate investing will help you means you’re off to a great start to achieving your financial goals. As an AZREIA member and new to real estate investing we take all of the guesswork out. You start by completing Launch Pad and then the rest of the items listed below. There is a Launch Pad session about every 30 – 45 days. This process will take months off your development time and gets you started doing deals as soon as possible.

1. Register for and complete Launch Pad – Proper planning is the major differentiator between those who succeed and those who don’t. We are so committed to you getting off to a great start that Launch Pad is included for AZREIA members for just $30. This four-hour session provides most new investors the following eight critical items:

  1. Your Optimal Investing Path
  2. Your Preferred Property Type
  3. Your Property Acquisition Plan
  4. Your Funding Plan
  5. Your Educational Plan
  6. Your Team Building Plan
  7. Your Networking Plan
  8. Your Beginning Timeline

We’re sure you noticed that each one of the above eight items begins with “Your”. That is because every investor is different. Your needs are unique to you, so your plan needs to be specifically designed to meet those needs. Also, your plan should fit in with your current life situation.


Register for the next available Launch Pad session: VIEW CALENDAR


2. Start implementing your Launch Pad Plan immediately! Your personal Launch Pad plan tells you what to do and when to do it. So, schedule the education you need. Begin building your team. Attend the networking sessions important to your plan. Implement your Acquisition Plan. Time to get going! It’s all in your Launch Pad plan!

3. Review the latest Market Update in the Member Resources tab in the Member’s Area of this website. As an investor it is important that you stay informed on the market. Creative real estate investing means being able to respond to market conditions in your negotiations, marketing, acquisitions, pricing, etc. It will take you a while to become comfortable with market trends. Attending the Market Update and Market News segments of AZREIA’s monthly meetings will help you understand trends and directions important to your investing.

4. Optional: View the Success Factors video series by CLICKING HERE. This free, one-hour, six-part video covers several important topics for new investors:

  1. What Will Be Covered
    1. Goal Setting
    2. Getting You Started Quickly
    3. Taking Months Off Your Ramp Up Time
    4. Getting You Connected
    5. Reducing Mistakes
  2. Jumping Right In!
    1. Getting in the Right Mindset to Succeed
    2. Top 5 Success Factors
    3. Separating Fact from Myth
    4. Understanding Different Investing Strategies
  3. Education: Spending Your Dollars Wisely
    1. Education You Need Versus Unnecessary Education
    2. Mentors: What You Need to Understand Before Spending Your Money
  4. It’s All for Nothing if You Don’t Do a Deal
    1. Finding Deals
    2. Getting Money for Deals
  5. Tools for Success
    1. Building Your Team
    2. Leveraging the Market Update
  6. Time to Get Started!
    1. Look Out!
    2. Your Next Steps

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Experienced Investors

Congratulations! You are somewhere along the path to achieving your objectives. Maybe you have rehabbed a couple of houses or acquired a few rentals. Possibly you have already achieved your objectives and are fully living the life you dreamed. Regardless of where you are on your path, an AZREIA membership will benefit you by helping you get to your goals faster, increasing the margins on your current investments and simplifying your business.

Seven Ways AZREIA Will Help You

1. Market Information – Market knowledge sets you apart from your competition. How you use the knowledge and information will be unique to you and your needs. Valued market information will help you adjust your investing to current market conditions, so you don’t miss opportunities. The knowledge you gain from this valuable tool will help you communicate as an expert. It will help you raise money from investors. You will justify pricing and offers based on market trend analysis. The Market Update is invaluable and free to members.

2. Controlling Your Cost & Saving Money – AZREIA members have access to exclusive benefits from dozens of our Business Associates and major national companies like The Home Depot where members can qualify for 2% rebate and receive exclusive pricing on paint, cabinets and appliances. AZREIA members on average save over $1000 per year each through our expansive relationships. Experienced members save many thousands of dollars each year.

3. Simplify Your Business – Real Estate investing is constantly changing. New processes, new technology, new creative techniques are always coming along. AZREIA will keep you at the forefront of it all.

4. Networking – The most successful investors realize the tremendous value of networking. AZREIA makes it simple to network with a purpose. From the structured networking of the Phoenix Real Estate Club designed for experienced investors to achieve results to great networking opportunities at all our strategy based subgroups, we have made networking effortless.

5. Improving Your Team – We know you already have a team in place. You wouldn’t be a successful investor without one. Through AZREIA’s Business Associate Program it is very possible you will improve your team with experts in virtually all of the services and products you will need. You know the value of having an experience, expert team. If you need to upgrade your team, AZREIA can help.

6. Education – You’re successful, so you are smart as it relates to investing. AZREIA’s most successful investors continuously invest in their advanced education. AZREIA’s reputation allows us the benefit to be very picky on the national educators we bring to our members. We realize it is important for you to understand the latest techniques and how to integrate them into your current investing.

7. Two Things Successful Experienced Investors Need To Do – We have found that time constraints often prevent or delay experienced investors from doing two thing that will protect their long term success – proper insurance coverage and exceptional asset protection. AZREIA will assist you in understanding your insurance coverage and asset protection. We are not an insurance company or attorneys and will not give you advice. We will help you to understand what you need to know and the questions you must have answers to in both of these critical areas. There is no reason to work a lifetime for success and give it away in a day. Don’t be “one of those investors” with a story. Preventing the loss of success is possible and something every investor should do.

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Help for Non-Members

Naturally we can help you more if you are an AZREIA member, but there are several things you can do as a non-member.

1. Take our FREE Entrepreneurial Self Assessment. This first step of our Launch Pad program helps you better understand your suitability for Real Estate Investing. It takes about 20 minutes to complete. [CLICK HERE to take the Entrepreneurial Self Assessment]

2. View the Success Factors videos. This free one-hour, six-part video series (CLICK HERE to view) covers several important topics for new investors:

    • What Will Be Covered – Goal Setting, Getting You Started Quickly, Taking Months Off Your Ramp Up Time, Getting You Connected, Reducing Mistakes
    • Jumping Right In! – Getting in the Right Mindset to Succeed; Top 5 Success Factors; Separating Fact from Myth; Understanding Different Investing Strategies
    • Education: Spending Your Dollars Wisely – Education You Need Versus Unnecessary Education; Mentors: What You Need to Understand Before Spending Your Money
    • It’s All for Nothing if You Don’t Do a Deal – Finding Deals & Getting Money for Deals
    • Tools for Success – Building Your Team & Leveraging the Market Update
    • Time to Get Started! – Look Out!; Your Next Steps

3. Take a Launch Pad session. This is free for members, but it is available to non-members for a fee on a space available basis. Launch Pad is a planning process when completed provides most new investors with the following:

    • Your Optimal Investing Path
    • Your Preferred Property Type
    • Your Property Acquisition Plan
    • Your Funding Plan
    • Your Educational Plan
    • Your Team Building Plan
    • Your Networking Plan
    • Your Beginning Timeline

I’m sure you noticed that each one of the above eight items begins with “Your”. That is because every investor is different. Your needs are unique to you, so your plan needs to be specifically designed to meet those needs. Also, your plan should fit in with your current life situation.


Register for the next available Launch Pad session: VIEW CALENDAR


4. Attend AZREIA meetings as a guest. There is a reasonable guest fee which is discounted if you register online.

    • The Market Update is presented at our Monthly Meetings, so you are able to receive this valuable information. (Only members may download and use the charts and data.)
    • You may meet AZREIA Business Associates in the Tradeshow during our Monthly Meetings. This will give you access to exceptional product and service providers that successful real estate investors use.
    • Networking at our Monthly Meetings is unsurpassed. As a non-member you may take full advantage of this opportunity.

5. Please enjoy our Blog of interesting articles by industry experts. Access our blog by CLICKING HERE.

6. The best way we can help you is to convince you to become a member. Our benefits are extensive. Our average registered member receives several hundred dollars in rebates and exclusive AZREIA discounts from The Home Depot. Discounts on education and services/products from our Business associates ensure you save big. Every AZREIA member should receive many times their annual dues back just through our rebates and discounts.

Please consider our “Build-Your-Own” membership plan as a cost-efficient way to fully participate in AZREIA. At only $60 a year under our current promotion and low meeting costs it is an ideal way to get started.

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