We are in the roughest real estate market I have seen in the 30+ years I have been in the real estate and note business. This market is even worse than the latter 70s and early 80s. The difference between today and in the 80s is two fold.

1.) In the 70s and 80s era, there was money and credit available, it was just expensive. However, today, the cost of money is arbitrarily low, but credit is tight, and only the best of borrowers can quality for loans. Many banks do not have the money to lend, especially in real estate

2.) In the 70s and 80s era, there was plenty of equity properties, as well as many of the loans were assumable at low rates. Property owners could sell their properties by either wrapping the existing loans, or getting cash up front for their equity, and have the buyers assume the existing loan. However, today there is often very little equity at best, and often properties are up side down. Little or no equity along with the due on sale issue makes buying and selling real estate difficult. HINT: There are wrap techniques that might solve this problem, but that is for another issue.

However, there is an answer. Those who have taken my workshops and seminars know I recommend in today's chaotic economy to "rifle" in on free and clear properties that you can purchase using owner financing. With owner financing, you as the buyer have more control of not only the terms of your mortgage, but your exit strategies will not be dependent on banks having money to lend, or denying credit to your potential buyers.

Since credit is tight in today's market, this is the prime time to be looking for free and clear houses, where the seller can provide the financing. Why? Because odds are they cannot sell their property otherwise. Since free and clear houses will tend to be older, banks are reluctant to lend on properties that are in need of repair or updating. Seller financing gives benefits to those trying to sell their properties because it provides them with a means to get rid of a problem. Remember, the sellers have a problem or they would not want to be selling. More importantly, seller financing provides you with an opportunity to purchase a good property at favorable terms, as well as provide you with that ever so important "exit strategy", not available in conventional financing.

For example, say you purchase a house for $100,000 with 10% down and a seller carry back note $90,000 note @ 5% interest for 30 years. Unlike bank financing, you can eliminate the due on sale clause, or make the note assumable. This will have the affect of expanding your exit strategies. When you sell, of course there is possibility of your buyer obtaining financing. However, contrary to conventional financing you have several other options to exit from your property. Just a few of your options could be you get a down payment, and either wrap the existing note for astronomical yields, or if you equity is small, simply get your equity from your buyers and then have your buyers assume the loan. There are many other techniques which I teach in my advanced note course, but these are the most common, as well as most simple.

Not only does purchasing your property with seller financing allow you many more exit strategies than conventional financing, but can also provide you with a safety factor not available in conventional financing. For example, your note could be non recourse, where you are not personally liable should the property go into foreclosure. Add to this the fact that when dealing with an individual, and not an institution, it is easier to modify your note should there be harder economic times ahead. Generally the seller does not want the property back, and will be more than happy to make adjustments.

Of course there are also other clauses that are available when purchasing properties using seller financing, such as built in discounts, substitution of collateral, and pre paid discounts to just name a few. While everybody else is out chasing short sales, subject to's, and
whole sale properties, do not overlook seller financing as a vehicle to purchase properties, as well as provide relatively safe exit strategies. If you are going to make it in today's economy, you need to be aware that there is more to notes than just selling it to a NOTE BUYER.

In summary, do not overlook owner financing when purchasing property. Start looking for free and clear properties that you can obtain with owner financing, and make the terms and conditions favorable to you, as well as give you "instant" exit strategies, that will not only provide you with safety, but can be very profitable as well. By applying notes to your "purchasing tool box", you will be doing deals while others are chasing the illusion of short sales and fifty cents on the dollar deals. Act out of knowledge, not out of fear or ignorance.

Hope this helps.

Please CONTACT ME.
if you have a topic you want me to discuss. It is from your feed back that I get my topics. I look forward to hearing from you.

Copyright © H&P Capital Investments LLC. All rights reserved

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I have several projects to finish this week, so I did not have time to devote to writing an economic column. However, I will convey some thoughts that economist and philosophers, both present and past, have conveyed about free markets. Notice the issues they were fighting for are as valid today as in the past. Their cumulative wisdom will represent free markets better than any article I write.

When you see that trading is done, not by consent, but by compulsion
-- when you see that in order to produce, you need to obtain permission from men who produce nothing -- when you see money flowing to those who deal, not in goods, but in favors -- when you see that men get richer by graft and pull than by work, and your laws don't protect you against them, but protect them against you -- when you see corruption being rewarded and honesty becoming a self-sacrifice -- you may know that your society is doomed.
Ayn Rand

When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.
P.J. O'Rourke

Everyone wants to live at the expense of the State. They forget that the State lives at the expense of everyone.
Frederic Bastiat

What ever crushes individuality is despotism, no matter what name it is called.
John S. Mill

Emergencies have always been the pretext on which the safeguards of individual liberty have been eroded. F.A. Hayek

Freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself. Economic freedom is also an indispensable means toward the achievement of political freedom.
Milton Friedman

The 'private sector' of the economy is, in fact, the voluntary sector; and the 'public sector' is, in fact, the coercive
sector.
Henry Hazlitt

The direction of all economic affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain's orders. The captain is the consumer. Consumers make poor people rich and rich people poor. They determine precisely what should be produced, in what quality, and in what quantities
Ludwig von Mises

Every election is a sort of advance auction sale of stolen goods.
H.L. Mencken

The free market punishes irresponsibility. Government rewards it. Harry Browne

A government which robs Peter to pay Paul, can always count on the support of Paul.
George Bernard Shaw

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. Henry Hazlitt

We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds...[we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers... And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for[ another]... till the bulk of society is reduced to be mere automatons of misery... And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.
Thomas Jefferson

No man's life, liberty or property are safe while the legislature is in session.
~Author Unknown

A claim for equality of material position can be met only by a government with totalitarian powers
F.A. Hayek

Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole-with their common aim of legal plunder-constitute socialism. Frederic Bastiat

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Frederic Bastiat

What kind of society isn't structured on greed? The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system.
Milton Friedman

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens. Adam Smith

Whoever claims the right to redistribute the wealth produced by others is claiming the right to treat human beings as chattel. Ayn Rand

Every man has a property in his own person. This nobody has a right to, but himself. John Locke

Were we directed from Washington when to sow and when to reap, we should soon want bread.
Thomas Jefferson

The essential characteristic of socialism is the denial of individual property rights.
Ayn Rand

A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government.
Thomas Jefferson

One function of profits, in brief, is to guide and channel the factors of production so as to apportion the relative output of thousands of different commodities in accordance with demand. No bureaucrat, no matter how brilliant, can solve this problem arbitrarily. Free prices and free profits will maximize production and relieve shortages quicker than any other system. Arbitrarily fixed prices and arbitrarily limited profits can only prolong shortages and reduce production and employment.
Henry Hazlitt

Liberty is an opportunity for doing good, but this is only so when it is also an opportunity for doing wrong. F.A. Hayek

A claim for equality of material position can be met only by a government with totalitarian powers. F.A. Hayek

There is no more certain way to deter employment than to harass and penalize employers.
Henry Hazlitt

No man will labor for himself who can make another labor for him.
Thomas Jefferson

There is all the difference in the world between treating people equally and attempting to make them equal.
F.A. Hayek

Government cannot make man richer, but it can make him poorer.
Ludwig von Mises

The desire for an increase of wealth can be satisfied through exchange, which is the only method possible in a capitalist economy, or by violence and petition as in a militarist society, where the strong acquire by force, the weak by petitioning.
Ludwig von Mises

The politician attempts to remedy the evil by increasing the very thing that caused the evil in the first place: legal plunder.
Frederic Bastiat

Underlying most arguments against the free market is a lack of belief in freedom itself.
Milton Friedman

Practically all government attempts to redistribute wealth and income tend to smother productive incentives and lead toward general impoverishment. It is the proper sphere of government to create and enforce a framework of law that prohibits force and fraud. But it must refrain from specific economic interventions. Government's main economic function is to encourage and preserve a free market. When Alexander the Great visited the philosopher Diogenes and asked whether he could do anything for him, Diogenes is said to have replied: "Yes, stand a little less between me and the sun." It is what every citizen is entitled to ask of his government.
Henry Hazlitt

All people, however fanatical they may be in their zeal to disparage and to fight capitalism, implicitly pay homage to it by passionately clamoring for the products it turns out. Ludwig von Mises

We must face the fact that the preservation of individual freedom is incompatible with a full satisfaction of our views of distributive justice. F.A. Hayek

Consumption cannot exceed production.
Tom Henderson

The above quotes are just food for thought.

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