A thought crossed my mind (quite a novel experience for me) Three kinds of Creative Financing Investors - Posted by Bill Gatten

Posted by Bill Gatten on April 14, 2000 at 15:38:29:

Ed,

This is great stuff! I truly hope you incorporate it into your seminars if you haven’t already done so. ?Thoughtful and right on target.

On the subject of my one-track mind (my words), you are right, but perhaps not in the way you would suppose. You see, when I seem to preaching and/or ending everything with–or somehow alluding to-- 3rd party trustee co-beneficiary land trusts, it’s not only because that’s all I live for, eat, drink, dream about and so on…its because (what folks don’t realize) that particular system of documentation truly DOES answer virtually every problem that comes up in real estate (creative financing or not). The process actually softens and liquefies the subject of the transfer so that it can become anything one wants it to be. It can be a means to sell tax write-off. It is a way to manage income property. It?s a way to get more (a lot more) money out of a rental. It?s a way to ?bridge finance? a loan (without qualifying). It?s a way to buy a home (for a lot less). It?s a way to sell a home (for a lot more). It?s a way to lease with tax write-off. It?s a way to sell one?s tax write-off. It?s a way to take over an otherwise non-assumable loan without risking lender involvement (re. DOS issues). It?s a way to hold; a way to flip; a way to assign…and on and on and on…

My love of this business (ours?the CREI bus), as I have stated it?s “the game,” not selling a product. I I learned a long time ago (when Old Blue was a pup) that if you truly love what you do, and do it really, really hard (until it squeaks)…the money follows as a secondary benefit. And I love showing people how a simple manipulation of some very common documentation can work wonders for them when all else seem hopeless or difficult.

Thanks Ed, for a very thoughtful response to my post.

Hope to see you at a workshop soon.

Bill Gatten

A thought crossed my mind (quite a novel experience for me) Three kinds of Creative Financing Investors - Posted by Bill Gatten

Posted by Bill Gatten on April 13, 2000 at 22:18:54:

During the year or two that I’ve been posting on CRE and some of the other discussion groups for Creative Real Estate Financiers, I’ve frequently encountered a strange and unexplained opposition from a few of the real pros that I couldn?t explain. When discussing various truly novel ways of “acquiring” real estate with no money out of pocket, no credit, etc., I couldn?t figure out why EVERYBODY wasn?t as astounded as I. But the reason for the enigma (OK, ?conundrum?) suddenly presented itself to me today.

The reason (I believe) is this:

There are two groups of creative real estate investors who follow this board, and who attend Creative Real Estate Financing seminars, buy the books and tapes, post here etc. Essentially they are – 1) the true Creative Real Estate Investor, and 2) the Creative Real Estate “Acquirer.” Both entrepreneurs to be sure, but one puts his/her money where his or her mouth normally is; and the other has to (or chooses to) boot-up from scratch without much (any) money, credit or experience.

Me? I’m an acquirer for sure. For me I dislike real estate ?investing,? the purpose and true enjoyment in all of it for me is the “game”…I want to see how much I can get, and just how far I can go without cash, credit, loans or monthly payments?or direct risk. That’s the really enjoyable part of it all part (the ?fun part?) for me.

I?m no Leg Grand, or Kaiser or Bronchik, but at the moment I own several properties (a reasons number) that are doing OK equity wise: albeit not spectacularly well, but I have good cash flows from them (well…reasonable cash flows). Then I have a few where there is NO positive cash flow, but excellent potential for appreciation over time and no negatives, expenses or obligations. And, too, from these I got a few thousand up front when I put the deals together (and will do OK when the trust terminate). Then, I have a couple that larger ones which are very heavy in equity and which constitute a considerable part of my retirement income (when I’m forced into that part of life).

Now…my suggestion is this: Know which one of these types you are: you have only three choices: you are either a Creative Real Estate Investor; you are a Creative Real Estate Acquirer; OR you are a ?Composite.?

This concept may seem a bit academic to some at first, but if you think about it…you begin to understand a lot of the differences of opinion tht fly back and forth here on CRE, and a lot of the disparate motivates that foks with such seeming like-minds appear to have.

Think about it?Why would someone with great credit and lots of money care about how to buy with nothing down and no credit? Then, by the same token, why would someone with marginal credit and no money be interested in new and improved methods of obtaining mortgage financing?

Why would some one with lots of cash and the ability to choose among different types of institutional financing ever be concerned about due on sale clause? It?s the guy(gal) who?s just starting out, or who operates on a shoestring in favor of building ?future? wealth vs. present income that would be concerned about a payments ever being late, or an insurance or tax bill remaining delinquent long enough to cause a lender to come snooping.

In my opinion, the composite guy is the true creative financier…his tool box is full and he/she keeps adding to it and learning something useful from every new idea that anyone would proffer. The pure investor or the pure acquirer only looks for that which he already knows and tends to ignore the new, novel or unique.

This explains (for me) why some folks are so enamored with one teachers gooks and tapes and swears by another; while and a different investor is non-plusssed by any of them.

Moral: If you are forced to be (or choose to be) and pure ?acquirer? now?that?s great, but know who you are, and don?t plan to stick there forever: become a composite as soon as you can rub some bucks together… If you are an investor, consider becoming a composite, your tool box can never be s full as it can get.

Oh well…just a thought.

Bill Gatten

Re: A thought crossed my mind (quite a novel experience for me) Three kinds of Creative Financing Investors - Posted by Ed Garcia

Posted by Ed Garcia on April 14, 2000 at 11:56:12:

Bill,

You are a Genius.

No matter how you answer a question, or conduct your postings.

If your answer doesn’t end with Pactrust, then you some how strive to plant the thinking.

I respectfully say that because I think you should know that it’s obvious.

If that’s not your intention, then you surprise old Garcia.
Bill I plan to attend one of your seminars in the next few month because your subject matter is
one of my weakest area’s, and I’m sure you will enlighten me.

Yes, I agree that there are different types of Real-estate investors.
Although there are different levels of investing as well different types, I’ll just give you 5.

INVESTOR ONE:

First I’d like to say that this board attracts your Tire kicker, Dreamer, Wantabe, Newbie, Talker,
Procrastinator, and the list goes on.

Now lets back up for just a second. If were honest, we all wear one of those titles at one time or another.
What makes us different is that we finally go into ACTION.

So now you have the small investor who starts out with nothing. No money, in some cases no credit,
just a DREAM to get a head.

They come to this board and learn techniques, concepts, the language, how to analyze property, and
the list goes on.

They start out doing lease options, flips, seller carry backs, because they’re not resourceful enough to do
their deals any other way.

The deals that they attract or develop in most cases are mediocre, because at this point with the weapons that they have to use, they can only attract highly motivated or desperate sellers.

In some cases they take courses to expedite their education and growth and are now considered the first
Stage investor.

INVESTOR TWO:

This investor now has been around for a while. They are either a part time investor with a good job, or an investor that has now gone full time.

The product that appeals to them are fixer uppers or distressed property. They now have learned how to
wheel and deal around fix up cost and have a combination of CASH and CREDIT.

Since they are more resourceful, they can negotiate better deals, and become more aggressive in their profit
structure. They now consider themselves true DEAL MAKERS and the main difference between them an a
the first investor, is that they cut better deals because they are a finished product at this stage of REI.

INVESTOR THREE:

This investor is with out a doubt a seasoned investor who is looking for bigger and better ways to invest in Real-estate. If they stay in SFR’s they want to find ways to cut better deals, by either obtaining a credit line
to purchase their properties, or having financing sources that afford them to call the shots.

They now are looking at other product such as Multiple Units, or some kind of small Commercial investment.
They now have money, but want to buy properties only with upside potential. This investor finds themselves going through a different thinking process then when they were in a one and two.

They see things differently. They are now aware of other investors more them ever before. They
on one hand, pat themselves on the back for getting to this level, and on the other hand, come to
realize that they are just a small frog in big pond.

They start to learn all over again, and either at this point quit, because they are in a comfort zone
and are satisfied with their accomplishments, or become even more motivated then before.

INVESTOR FOUR:

This investor is looking for a place to Park their money. This investor is resourceful.
This investor is still looking for some up side in their deal, but at the same time they’re focused on a
return for their money. They invest in commercial deals such as Multiple Units, Shopping Centers,
Office Buildings, and are active with what’s going on in their community.

This investor is now talking Cash on Cash returns or Cap Rates.

This investor depending upon their age, will either purchase major properties with up side potential or
coupon clippers such as a Wall Mart or K-Mart. As a matter of fact, they’ll do both.
This investor could be a group of Doctors who have passive income or income derived from their practices
and are looking for alternative investing.

INVESTOR FIVE:

This guy is a Donald Trump type of an investor. This guy doesn’t just go along with the flow, he takes the flow. He makes things happen.

He don’t just look for properties with upside, but creates them. Every time you see a new shopping center
go up, your seeing this guy. This investor has more than just CREATIVITY, he has VISION.

Bill, I could go on and on, and be more descriptive as to my perception of the different types of investors.
But I found it interesting when you brought this subject up, as to not only where do we think we are
in the in REI, but how do we view ourselves as an investor.

You always have to be asking yourself, Where do I go from here?

Although the DESTINATION is the Goal, it’s really all about the JOURNEY.

Ed Garcia

Not in y’all’s leagues yet but … - Posted by carolFL

Posted by carolFL on April 14, 2000 at 08:55:14:

I couldn’t agree more!
One twist I would add… it does the investor a great deal of good to start out as an acquirer… learn the techniques that allow one to do the deals whether there is good credit, cash or a bottomless pit!

The thing about learning and experience is that they cannot be taken away. The credit and cash can be … just ask Ray!

So by forcing oneself to learn to do things creatively, all options are open while they are there, and some will be there forever - no matter what.

Don’t see this as an either / or when one can have it all.

Thanks for your posts, Bill.
Carol

That’s quite a large thought, Bill. Are you sure you haven’t been practicing? :wink: - Posted by ray@lcorn

Posted by ray@lcorn on April 13, 2000 at 23:38:33:

Bill,

I think you make a good point. My dad used to tell me that I’d go broke trying to sell everybody only what I would buy. Different strokes, as it 'twer.

I hope I have made the leap to composite… though to tell you the truth I’m still struggling with your last deep thought post. Now am I a composite Athlete/Warrior or was that a Warrior Executive…???

I’ve known for years that it was the game that kept me in this biz. When you do it 'til your broke, then do it some more 'til you get right, it’s got to mean more than the dough. There’s lots easier ways to get through this world.

You though, I suspect are a breed of a different sort, since you had the omniscience to ask the question, and the prescience to then answer it! I think you typify a third kind of Creative Financing Investor… maybe an “Amasser”, who concentrates on bringing enough knowledge together with enough minds so that the resulting reaction is a quantum leap for the individual, the community and for mankind. When you get that PAC thingy to sit up and speak for itself you’ll be out of a cause!!

BTW, that was a mighty nice piece you posted over on “that place” the other day, even if it didn’t stay up long. Your comment that the Internet is a small community really hit home with me. Because it is, and we do need to take care of the good guys. And in my book, you’re one of the good guys too. I know I speak for many when I say I hope you will always join us here.

ray

Re: A thought crossed my mind (quite a novel experience for me) Three kinds of Creative Financing Investors - Posted by Bud Branstetter

Posted by Bud Branstetter on April 14, 2000 at 23:41:49:

Ed, Let me know when you plan on attending one of Bill’s presentations. I’d like to go to one of them too. I just didn’t want to wait till he hits Dallas in October.