Creative financing deal - Posted by Paul Macdonald

Posted by David Alexander on February 12, 2000 at 24:01:33:

You dont say what the assets are? But first off look for the assets that produce cash so you can sell the cashflow. I would imagine that some of these assets are free and clear. Depending on how much cashflow he’s willing to sell off you could be sitting on a goldmine.

David Alexander

Creative financing deal - Posted by Paul Macdonald

Posted by Paul Macdonald on February 11, 2000 at 23:04:21:

Hello John,

I have a creative financing deal that was offered to me today that is beyond the envelope I normally work in.

Per his story:
Fellow is a large landowner. Has about 2 million in personal assets of which 1.4 million plus is readily attachable. Owes he thinks about 300k now on the personal.

He wants 260k net. He is offering a one-year balloon. One year prepaid payments. And he is willing to offer 100% of his personal and commercial assets. He wants the money very fast to complete construction of a commercial enterprise he owns 51% of.

My question:
How would you handle this opportunity?

Thank you once again,

Paul Macdonald

Thank you for the feed back. He balked. - Posted by Paul Macdonald

Posted by Paul Macdonald on February 17, 2000 at 23:11:46:

I wasn’t feeling comfortable about this one. I asked for additional information and he balked. Therefore, its water under the bridge.

Thank you again.

Paul Macdonald

Re: Creative financing deal - Posted by David Butler America’s Note Network

Posted by David Butler America’s Note Network on February 15, 2000 at 19:29:11:

Hello Paul,

I was tempted to add my two cents worth, but Mike, John and David have made some good points that are probably sufficient. On the other hand, this may very well be the type of hard money situation I can get done for you. Email me if you would like to see if we can work something out that will be to our mutual satisfaction. Hope this helps.

David P. Butler Vice President, Broker Relations

Re: Creative financing deal - Posted by John Behle

Posted by John Behle on February 15, 2000 at 12:48:18:

I operate under a couple premises. One is that I don’t do out of area deals. Occasionally I will venture the next state over if the deal is right. If I or an investor’s funds are into the deal, then I always work under a “Worst case scenario” which means I might have to be very actively involved and end up owning some property that I then have to deal with. No problem in my area, but out of state is (for me).

I don’t know areas, markets, economies, etc. in different states. To me what is happening in a particular area with development, crime, etc. is crucial to investing.

Another factor is I generally can’t be competitive out of state. In my area I can do deals that no one else can and receive yields no one else does. That is because I am willing to do the due-diligence and deal with potential problems.

Another premise is not loaning against assets that can’t pay me easily. I don’t care if someone is worth 100 million - if they don’t have some substantial and safe collateral to put up - forget it. People rise and fall - properties don’t (as much or as quickly).

Someone can literally be “wealthy” one day and file bankruptcy the next. That can be because of lawsuits, injuries, scandal, accidents, business turnarounds, etc. More often than not, they were not really wealthy anyway - it was on paper or a sham. A property is easy to check out. A person can play smoke and mirror games that can be hard to see through.

There is a general “rule of thumb” too. That there is an “Inverse relationship” between a company or individual’s show of wealth (offices, autos, etc.) and their financial stability. Of course, that is a rule of thumb only. Their purpose are to get us to pause or look deeper for verification.

I just know too many millionaires that drive old pickups and too many “insolvent idiots” out trying to impress people with their show - especially potential investors.

So, who knows who your “client” is, but if there isn’t hard and fast real estate collateral (land is a challenge as Michael said) then don’t bother.

I would look for some good solid residential property with good LTV’s and I would also want to know the financial situation through financial statements, tax returns, etc. Of course a funding source making a hard money loan will do their own due diligence and have their own requirements.

If there are saleable notes, sell them. If there is just real estate as collateral, you will likely need a local funding source willing to make a hard money loan and you might be able to receive some points or a referral fee. They may be hesitant to give a fee and you need to check with state laws. In some areas you could only receive a fee by being a licensed mortgage broker or working with a licensed company. In other areas all you need to do is start a business and become one.

Re: Creative financing deal - Posted by Michael Morrongiello

Posted by Michael Morrongiello on February 12, 2000 at 23:34:44:

Find out if he is collecting payments on any real estate secured paper? The collateral can be loacted in any state. If he is willing to sell all or a portion of those type “assets” that is the quickest way to raise CASH without him having to go further into debt.

If he is not holding any paper, then I suspect he wants to tap into the equity he has in some land collateral and borrow funds as a land loan . Land loans can be tricky since values flucuate.

Michael Morrongiello