Mortgage Money Magic
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Jack Miller wrote… I started a clinical review of the ways in which I have used mortgage debt, and began to realize that being able to structure transactions around private debt had been the catalyst for most of the profit I’ve made over the years. Over the years I’ve bought hundreds of houses in periods of both high and low interest. Other than when I’ve taken title subject to existing mortgage debt, I haven’t ever depended upon conventional institutional financing when I bought, even though I relied heavily upon it when I sold. Instead, I created notes and mortgages to be carried back by the sellers. The terms of the mortgage debt that I structured were the real profit generators.
Instead of using debt merely to buy houses from others, I’ve used it as a form of grease with which to lubricate both my negotiations and my transactions. In this vein, while fads in the mortgage market have come and gone, I’ve continued to buy, sell, exchange, and manage houses as my principal source of real estate income, leaving the mortgage business to others.
In each purchase transaction that I completed, I required that the owner lend me the money with which to buy his property. From time to time, when the equity was small, I simply took over his existing loan payments. Sometimes I horse traded one property for another, or one Note for another. But, over the 40 years that I’ve bought, built, and re-habbed houses, with the exception of the use of my VA loan entitlement to buy one house, I’ve never signed my name to personally guarantee payments, nor made an application at a bank for a conventional loan.
The reason for this book is quite simple. In these past few years of easy credit and low interest rates, people have forgotten how to make a profitable deal through the use of creative financing. Even in periods of low interest rates, had I used conventional institutional financing, I’d have bought far fewer houses and made a lot less money in the process.
It’s my observation that few people, even among those who teach ways to create paper, have used creative financing in as much variety and in as many ways as I have. I wanted to share these insights before they disappear.
Today, the financial concepts that have created a fortune for me by transferring wealth from seller to buyer, and vice versa, are being lost through lack of use. In the meantime, institutional lenders are becoming more and more sophisticated in their dealings with consumers who rely upon them for financing.
To make matters worse, borrowing money is becoming more hazardous. One reason is that, currently, the Financial Crimes Enforcement Network (FINCEN) is automatically comparing loan applications with income tax returns to assure that loan applicants aren’t puffing up their incomes to qualify for loans.
Moreover, the use of computers has enabled lenders to begin to segregate borrowers into groups and to charge different rates for each group. This is called risk-based financing. As a result, large numbers of home buyers will end up with lower mortgage rates than they would get under today’s pricing system, but some will be required to pay more. Risk-based pricing is a concept that will begin touching individual home buyers and those who refinance their equities across the country.
Though most borrowers probably are unaware of it, the mortgage industry is one of the last major financial sectors in the American economy that forces borrowers with the best credit to subsidize the interest rates paid by borrowers with less-than-perfect credit.
This book will teach you how to use creative financing to buy and sell real estate without using banks or institutional financing.
TABLE OF CONTENTS
14. Designer Debt Transactions
16. Band of Investment Theory
20. Changing the Shape of Payments to Change the Yield
23. Increasing the Safety of Unsecured Notes
24. Mortgages and Deeds of Trust
26. Using Mortgages to Divide Property Interests
27. Assignment of Rents Language for Mortgages
31. Controlling Assignment of Notes and Mortgages
38. Double Mortgages that Double Yields
43. Dealing in ‘Pieces’ of Paper’
48. Buying ‘Paper’ With ‘Paper”
49. Optioning Notes at Discount
51. Discounting Hospital Bills
54. Forbearance Profits
56. Substitution of Collateral
62. Wrap-Around Financing Concepts
65. Wrap-Around Note Language
68. Convertible Demand Wrap-Around Notes
72. Circumventing Due on Sale Restrictions
81. Wrapping Loans from the Inside to Increase Yields
83. ‘Split-Wrap Around Financing
86. Under-Wrapping High Interest Rates
89. Installment Contracts
93. Wrap-Around Contracts
95. Hedging Against Unknown Factors
103. Indexed Land Contract Language
105. Assignment of Contracts
107. Buying With Discounted Paper
108. Understanding the Power of Compounding
113 Converting Compound Debt to Simple Interest
115. Negotiating Zero-interest Financing
117. Making Money Buying High and Selling Low
119. Single-Payment Note Financing
124. Switching Zero-interest to More Motivated Sellers
125. Multiple Note Strategies
127. Moving Discounts from Paper to Property
129. Buying With Zero-Coupon Bonds
132. Using Corporations to Hypothecate Notes
138. Using in Corporate Debentures
139. Investing in Corporate Bonds
144. Reducing Payments by Reducing Principal
147. Indexing Principal and Interest
147. Equity Conversion Loans
150. Equity ‘Kickers”
152. Shared-Appreciation Loans
154. Pac-Man Loans
155. Financing Fixer-Uppers
160. ‘Equity Stretchers’
164. Stepping Up Basis
165. Selling Formulas
168. ‘Stutter-Note’ Payments
171. Asymmetrical Note Payment Techniques
173. Using Unsecured ‘Payment’ Agreements’
175. Using Trusts for Installment Sales
178. Trading Leaseholds for Options
181. Loan Options
184. Leases That Act Like Contracts
188. Leasing Strategies and Tactics
189. Buying With Pre-paid Leases
190. Leasing for the Down Payment
191. Lease – Equity Swaps
193. Builder’s Model Lease-Back
194. Rent for Equity Exchange
195. Compound Leasing Formulas
196. Lease/Option Tax Shelters
201. Lease/Option Wrap-Spread Strategies
205. Performance Notes, Mortgages, Leases and Options