One of the very first "no money down" deals that coauthor Peter Conti did was put together with a blanket mortgage. The owner of the property ran a small construction company, and he simply wanted to get rid of the apartment building he owned. All Peter had to do was come in and assume the existing mortgage and take over the payments. Now understand that at this point, Peter was no Donald Trump. He didn't have a huge track record or lots of money in the bank to convince a lender that it was okay for him to go ahead and assume alone.
However, Peter did have some other properties he owned. He was able to put these up as additional security to convince a lender to go ahead and allow him to assume the loan. The key in using blanket mortgages is knowing when it's absolutely necessary. You never want to cross-collateralize properties unless you need to.
^jjOOTf One of our Commercial Mentoring Program students named Mike came across a small classified ad for a 20 unit apartment building. After calling the owner and getting the details Mike ran through a quick analysis of the property. He could see where even if he ended up paying the price the seller was asking the building would make money from day one. Mike sat down with the owner and got to know him while creating a good connection. Mike found out that the seller was upset because all the other investors were contacting him with low offers. The seller had worked hard for many years to build up his property and was disturbed by all the people who wanted to beat him down on his price. Mike decided to offer a blanket mortgage to get the seller to carry back 100 percent of the financing for his purchase. At this point, Mike has over $600,000 of equity in this property that he bought without using any of his own money.
Be careful when you're dealing with blanket mortgages, because you really are pledging your equity and those other properties. If something should happen on the property that you purchased using a blanket mortgage, the seller or other lender will be able to foreclose not just on the property that you purchased, but on the other properties as well.
Drawing on 401(k)s or IRAs
One of the best sources of secondary financing is money from other people's IRAs. This concept may seem strange, but stick with us on this one. In order to provide loans for you to buy real estate, the only thing a person needs to do is move her IRA from a traditional account to something known as a self-directed IRA account. The only difference is that with a traditional account, the institution decides how to invest your money — usually in stocks or bonds.
With a self-directed IRA, your new friend can decide where that money is going to be invested. To get started with this technique, ask everyone you know this question: "Do you know of anyone who would like to make higher rates of return on their retirement funds?"
When someone answers that she would, simply give her an application to transfer her funds to a self-directed IRA company. Then keep in touch with her to let her know about potential investment opportunities. Typically, with funds from an IRA, you want to make sure that they're secured with a mortgage against the property. Companies that allow you to self direct an IRA are listed at www.realstateinvestinglinks.com.
Was this article helpful?
Discover the Jealously Guarded Insights of Real Estate Tycoons and Hot Dealers! Back in the days of the wild, Wild West, when easterners traveled across this vast country looking for opportunity in the newly opened territories, they were often referred to as a ‘tenderfoot’.