Learning creative finance from Dave: success strategies in real estate

In a recent REsimpli Mastermind episode with eminent real estate investor and educator Dave, Host Sharad Mehta looks at creative ideas for property buying and financing. Dave and his wife Mel have produced an amazing portfolio spanning five nations totaling over 264 units. Currently running the Action Family Mentoring Program for more than 2,101 participants. The episode examines how they negotiate deals and use creative financing to enhance their outcomes.

Dave talks about their approach of creatively funding real estate purchases via revenue creating opportunities. Dave and Mel focus on completely owning their houses using alternative financial strategies instead of seeking joint venture partners. These include seller financing, promissory notes and retirement fund utilization, wrap mortgages, and agreements for sale. This approach helps people to govern their own houses and avoid upfront costs.

Most of the discussion is on locating and negotiating deals for underperforming real properties. Dave observes their preference for properties requiring cosmetic improvements that would cause forced appreciation. Providing options for customizing presentations to fit buyer needs and seller finance helps to highlight benefits such delayed capital gains and interest via the use of negotiating techniques.

Stressing aspects with value and aesthetic enhancing possibilities, Dave reviews their property-selection criteria. People desire to mix conventional and private loans when their worth increases to refinance their houses and pay off more costly initial borrowing. This strategy properly controls financial resources and optimizes asset value.

Teaching sellers the advantages of unusual funding sources and aggressive negotiating techniques are the two main ingredients of success. Handbook for First-Time Investors For individuals just starting their real estate investing path, Dave counsels house hacking as a low-cost entry strategy. He also advises vendors on seeking off-market prospects and presenting creative finance proposals.

Key Takeaways:

1. Turning Crash Into Cash:
   
   After a car crash shifted their focus, a former firefighter and college worker quit their jobs and went full-time into real estate. With 264 units in the US, Canada, and beyond, their rise was unexpected. But what was the spark behind their successful mentoring program? (00:01:00)
   
2. Seller Financing Secrets:
   
   The Investor thrives on seller financing, seeking off-market properties and creative deals. Seller willingness is key, so Dave shares the process of crafting the terms that work for both sides, and what happens when it’s time to refinance or flip. (00:03:29)
   
3. Winning Deals with Seller Financing:
   
   Investor Mel & Dave explain that seller financing works best when sellers don’t need the full payment upfront. They highlight the benefits of deferring capital gains and earning interest, making sellers like banks. For properties with existing mortgages or high interest rates, the key is finding underperforming assets. By lifting property value through cosmetic renovations and bringing rents to market levels, even deals with 7% interest rates can still work—but only if the numbers make sense. (00:05:55)
   
4. Tailoring Deals for Success:
   
   Dave revealed how they structured deals by securing seller financing or using private lenders. They share how they prefer seller financing for long-term holds, like a recent 10-unit in Costa Rica, where they negotiated a 5-year term. In other cases, like their Ohio flip, they focus on getting the lowest possible price. Their approach is highly flexible—offering different terms, adjusting interest rates, or structuring balloon payments—all depending on the deal’s specifics. The big question: how do they manage to balance seller demands while still ensuring solid returns? (00:08:03)
   
5. House Hacking & Creative Financing:
   
   Investor Dave discussed the benefits of house hacking for beginners, advising to start with duplexes or off-market deals. They stress the importance of asking sellers about creative financing, particularly for properties listed by owners on platforms like Craigslist or Facebook. The approach works even on MLS deals with real estate agents, though results vary based on the seller’s situation. They reveal how sellers with larger portfolios may be more open to creative financing options to manage tax implications, while full 100% seller-financed deals are rare but possible. (00:15:00)
   
6. Mastering the Offer Pitch:
   
   To stand out with first-time offers, the Investor practices by anticipating seller questions and perfecting pitches with friends. But what unique method of pitching to potential investors might unlock more funding? (00:22:00)
   
7. Navigating Private Money Hurdles:
   
   Using private money as a deposit has its complexities. The Investor explains how seasoning periods and working with different lenders create obstacles—but what’s the trick to managing multiple loans and entities to make deals happen? (00:25:00)
   
8. Financing Challenges & Personal Guarantees:
   
   Sharad and Investor Mel & Dave discuss the complexities of refinancing deals across different states, balancing multiple lenders, and navigating the limits of Fannie Mae and Freddie Mac loans. Mel & Dave emphasize the importance of using mortgage brokers and managing ratios carefully. Despite their international portfolio, they continue to personally guarantee their loans, a challenging but necessary aspect of their strategy. (00:28:19)
   
9. Creative Financing Pitfalls:
   
   In a low-interest environment, creative financing can be powerful, but it comes with risks. The Investor warns against over-borrowing and stresses the need for exit strategies—yet what method has been their safety net in uncertain markets? (00:31:00)
   
10. Exit Strategies & Financing Risks:
    
    Dave stressed the importance of having a clear exit strategy before entering a deal. They share how deferring taxes into the next year can benefit sellers, especially at the end of a tax year. However, the biggest pitfall with creative financing is failing to plan for the end of a deal, even when a property cash flows. Dave warns against using private money to pay interest on previous loans, emphasizing that without a solid exit, even zero-interest financing can lead to trouble. (00:37:00)