In this second part of our conversation with Jenn and Joe, we take a deep dive into the risks and negotiation strategies involved in creative financing. They break down why non-recourse debt is a game-changer, how to mitigate risks when structuring deals, and the importance of vetting buyers to ensure financial security.
Jenn and Joe share real-life experiences, including strategies like lease options and structuring deals to minimize financial exposure. They also emphasize the importance of working with highly motivated sellers and how to craft win-win situations through smart negotiation tactics. Plus, they reveal the key mindset shift investors need when evaluating deals—focusing on terms rather than just price.
Key Takeaways:
- 02:15 – Understanding non-recourse debt and how it protects investors.
- 05:40 – Why lease options can reduce risk and provide financial security.
- 09:30 – The importance of vetting buyers to ensure timely mortgage payments.
- 14:20 – How to identify highly motivated sellers using a 1-10 scale.
- 18:45 – Negotiation tactics to secure deals with no money down and favorable terms.
- 24:10 – The cost vs. price mindset shift every investor should embrace.
Jenn and Joe also share insights from their own podcast, Creative Finance Playbook, where they break down deals and strategies to help investors navigate the world of real estate.
Connect with Jenn and Joe:
- Email Address: hattie@creativefinanceplaybook.com
- Website: www.creativefinanceplaybookcom
- Facebook: https://www.facebook.com/CFPlaybook
Connect with Corwyn:
- Contact Number: 843-619-3005
Shoutout to our Sponsor: ROBYN COLLINS
Do you want something more? More Meaningful Moments opportunities, deeper relationships and memorable experiences? Do you want to make a difference? If you say YES, a career and real estate could be the opportunity you’re looking for guiding people to one of the most important decisions they ever made, the purchase or sale of their home can be both rewarding and lucrative.
Exit Realty has a revolutionary compensation model training and technology that provides you with the tools you need to start and build your successful real estate career. Call me today ROBYN COLLINS with REDROBYN HOMES at 843-557-5003. Again that’s 843-557-5003 or visit RedRobynhomes.com/join.exit and make your Exit today.
Support this podcast: https://podcasters.spotify.com/pod/show/corwyn-j-melette/support
ROBYN:
Do you want something more? More meaningful moments, opportunities, deeper relationships, and memorable experiences? Do you want to make a difference? If you said yes, a career in real estate could be the opportunity you’re looking for. Guiding people through one of the most important decisions they ever made, the purchase or sale of their home can be both rewarding and lucrative. Exit Realty’s revolutionary compensation model, training, and technology that provides you with the tools you need to start and build your successful real estate career. Call me today, Robyn Collins, R – O – B – Y – N Collins with Red Robin Homes at 843-557-5003. Again, that’s 843-557-5003 or visit us at redrobinhomes.com/joinexit and make your exit today
CORWYN:
Good morning, good morning, and great morning, guys. Welcome to another fabulous episode of Exit Strategy’s radio show. Hey, I am your host, Corwyn J. Melette, Broker and Owner of Exit Realty Lowcounty Group, in beautiful North Charleston, South Carolina. If this is your first time listening to this show, you sir or ma’am are in for a treat. Because our mission is very simple, that is to empower our community through financial literacy and real estate education, guys. We are legacy building. That is what we do. Now, we’re diving into part two of our conversation with Jen and Joe Delle fave. They are the Creative Finance Playbook podcast host. Let’s jump in. Let’s talk about the risk. Creative financing is interesting, again, very interesting. So what are the risks in creative financing?
JOE:
That’s the neat thing about it, because I learned a lot of lessons from a lot of big investors in 2008. What was happening was they have a company, an LLC most typically, but then what would happen is they’re going to buy properties in that LLC, but what many people don’t realize is they’re personally signing their name. They’re personally guaranteeing that debt. If that property ever goes bad or something happens, they can now come after your personal assets, even though the property is owned by a company. It’s because you personally guaranteed that debt. To avoid that, it’s called getting non-recourse debt. If something goes bad, the only thing they could take back is the house. They can’t come after you personally. The reason why I love creative finance is because now we have non-recourse debt. That’s one of my favorite things about it. What are the risks involved? I really don’t know.
JENN:
I would say, if anything, you have to be ready to make those mortgage payments to the seller’s bank, the lender, making sure that no matter what, if your tenant doesn’t pay you, you’re still ethically, morally, legally, financially responsible to make those payments or the seller will have to take their house back. I know some people assign these deals to other people. That’s why if you’re doing that, you got to make sure you have a really strong checklist and that you really vet your buyer so that doesn’t happen. Because we, even during COVID, we were making those payments. If we didn’t get a rent payment, we still are making the mortgage payments because that’s our job. I would say that would be the only risk.
JOE:
That’s how you do a lease option. Those people give you $20,000, so they’re less likely to make late payments. If they do, you’ve got $20,000 sitting there that you’re going to be able to sock away some payments for that. There are, just like anything else, there’s always some risks. But there’s definitely ways to make sure it is a lot less riskier than many other ways.
CORWYN:
That’s one of the things that I had a colleague that did that with a house. They actually owned a house, or still own the house, actually, because they ended up having to take it back. But they put someone on a lease purchase for the house. I think the people put maybe $40,000 down on this house, $40,000 to $50,000 down. They just didn’t have a good credit situation, couldn’t finance to make the purchase at the time. So, to put the money down was making the payments. And then, at some point in time, they just wasn’t able to make the payments. They took the house back, they moved back in it, and there was no loss for them, if that makes any sense. These things work, because in the right scenario, if you will, that family, that person would have completed that transaction and had only full ownership of the property in whatever prescribed time period. But because they didn’t, the other person didn’t necessarily lose, and they were able to do it all over again if they wanted to. But they haven’t.
JOE:
You get that $40,000 non-refundable deposit, and so, hey, bad things happen to good people. I understand that we’ve had some of our renters where, one, he’s like, hey, guys, I gave you that big deposit, but my job’s taking me out of state. You guys get the house back. He’s like, I feel so sorry, I can’t buy it. He knows he didn’t get his deposit back, but we even offered, like, hey, if you leave this place crystal clean, I’ll at least give you $1,000 to help with the move. And he’s like, I can’t believe you did that. Thank you so much. So, things happen. We’re all humans. We’re just trying to help.
CORWYN:
So, what is your, again, negotiating these types of deals, what is your, and if you’re willing to share, your strategy that you employ? And I imagine it changes case-to-case situation, but what kind of strategy are you employing in your negotiations?
JOE:
First thing I need to look at is the seller highly motivated, right? We’ve developed a scale of one to 10, 10 being like, hey, take my house, you could have it, and then the one is like, why are you even bothering me? So, there’s this scale. So, what we’ve realized a while back was the people that we do business with, they’re highly motivated. They’re usually at eight, nine, or 10. So, what I realized, if there’s a scale of one to 10, that only the three are the motivated ones, that means majority of the people you’re going to talk to, you’re not going to do business with, and that’s okay. So, spending the more time with that eights, nines, and tens, crucial. So, if you have somebody, they’re like, I don’t want to tell you my price, and I’m just shopping, and I’m just one, see you later. But the people who, for an example, like Derek, I’ve already moved. I need to have this place sold. Like yesterday, I can’t afford two payments. It’s already hurting us. That’s how these opportunities are going to open up. So, when you have these conversations, your seller is a lot more opening to solutions. If you’re drowning in the middle of the ocean, you’re not going to be picky on what kind of raft comes to save you, anything’s going to work, right? But some of these situations, they’ve reached out to cash buyers, but cash buyers need a huge discount. These are turnkey houses. They’ve had it listed with an agent already, and it’s not selling, and now they’re really in a spot. Who’s left to help them? What’s going to be next? Are they going to let the bank take the property back? So, here’s where we can step in. I could pay a fair price for the house, and I’m able to buy it with terms. And so, here’s the thing that, for the listeners, like, what if price didn’t matter? What if you’re able to buy a house with a hundred bucks down, spend a few thousand in closing costs, and then able to either take over somebody’s payment that has a really low two-point-something, three-point rate, or even better yet, a free and clear property that you could even get a no-interest mortgage, right? So, the fun fact is this, 40% of all houses across the USA are owned outright, free and clear. That means four out of 10, you can make those offers on, even the beautiful ones, even the fixed reppers. It doesn’t matter. Now, on the other side, the people who do have a mortgage, two-thirds of them, 66% of those, have an interest rate under 4%. So, what that means, there’s opportunity all everywhere. Either I could take over someone’s existing mortgage at a 2.85 rate, like I’ve got right now on Cape Coral, Florida, on this 3,000-square-foot house, it’s almost a million-dollar property, at a 2.8 rate, that is crazy. So, when I’m negotiating with the sellers, the one thing, and here’s what I look at. Number one, my most important thing is, I typically buy with no money down. That’s exactly what I even say to the seller. Like, hey, Mr. Seller, I typically buy with no money down, okay? And many times they’ll just say, okay. I’m like, yay. So, I want to buy with no money down, because I do have to pay some closing costs. Next, what is my payment? Can I cashflow some of these deals? The interest rate’s so high, it doesn’t cashflow. It doesn’t make sense. Can’t do it. So, I want to buy with no money down. I want some cashflow. Then, how long is my term length? Are they giving me 20 years, 30 years? Some do. And then, the last thing is the actual price, which is funny, because that’s the most important thing to the seller, is their price. So, if it’s least important to me, but most important to them, that’s how we’re creating wins, because if I had a house and I wanted $10 million for it, but I would charge you a dollar a month for the next 10 million months, I could buy a 10 million. I’d take two for a dollar a month. So, the price really isn’t that much of an issue, as long as I’m able to make that $1 payment. So, for me, I really want to find deals I could buy with no money down, get some cashflow, get a nice low payment, and a really long-term length.
JENN:
And I think that’s the biggest mindset shift for most investors who are coming in with like, oh, but I got to get a great deal on the property, and the whole package is the deal, right? From front to back. So, that’s really important.
CORWYN:
Cost versus price. That’s the conversation I tell people all the time. That most people I know would drive a Mercedes, if they could drive one, a brand new one, for the same price that they bought that Chevrolet for. You know what I’m saying? So, all you have to do is get the right terms. If it makes sense, then, again, it’s always cost versus price. You might pay more for the Mercedes, as far as price, but if you have a cost, monthly perceived cost, that’s in line with, say, a Chevrolet, or maybe even, I don’t want to take us back too far, but maybe to a UGO, then at that point in time, you might be driving that Mercedes versus driving that UGO.
JENN:
I don’t even know what that is.
CORWYN:
You see? I’ll go look one up, a UGO.
JOE:
Yeah.
JENN:
You might have to show me.
JOE:
I was in the car business. I know what those are.
CORWYN:
But short version is that what you might, you may consider that. So, that’s that conversation that you just brought forward. So, guys, look, so you guys have a podcast. Obviously, these are some of the things that you talk about, but let’s get that information out for our listeners. What’s the name of the podcast?
JENN:
Creative Finance Playbook with Jen and Joe. We have a YouTube channel and we have it on Apple and Spotify as well.
CORWYN:
Perfect. Perfect. So, our listeners, guys, you need to tune in because you guys talk about what on the show. What is the audience and what’s the normal conversation? Are you guys breaking deals down or what are you guys doing?
JENN:
Yeah, we do a little bit of everything. Deal breakdowns. We were talking about yesterday. We just said, like, why BRRR, if you’re doing that strategy, might not be the best for a new investor, especially these days.
JOE:
How do you even find the sellers? That’s one of our favorite things. How do we find these people? The gift for your audience today is we’re giving away the strategy on how you could generate off-market leads anywhere in the country for free. Not one cent, not one dollar.
JENN:
Zero dollars. Just a little bit of time and it’s not hard.
JOE:
All of you could do this. So, I’m not going to use Charleston for an example because I love it there. So, I’m going to use another.
Let’s go to Charlotte, North Carolina, okay? Because I don’t want to creep on your territory. So, if I want to get leads in Charlotte, North Carolina, these are people who are going to reach out to me. I’m not cold calling. I’m not door knocking, nothing. So, here’s what I do. I go on my, take some notes here, guys. I go on my personal Facebook page, Joe Delle Fave. I go to the search bar on Facebook and I’m going to type in Charlotte, North Carolina, and it’s going to say, are you looking for posts made about the city? Are you looking for people named Charlotte, North Carolina? Or are you looking for groups? I’ll click groups. Now, there’s a ton of them. Guys, there’s over 10 million Facebook groups all around the globe. So, there’s lots of these. So, in Charlotte, there’s going to be a ton of them. It’s not just Charlotte. It’s all the surrounding towns, the county. They all have their own Facebook groups. Now, these are garage sale groups, yard sale groups, cooking groups, mom groups, dad groups, different hobbies groups. It could be singles looking for singles because maybe they have an extra house. Right? Whatever that is, I join them all. But the ones I join are the ones that have 10, 20, 30,000 people in the group or more. So, what am I doing? I’m in all of these groups now. I could join them right now, this second, and I could get leads in a few hours. So, once I joined these groups, some of these admins are a little slow, let you in, so join a bunch. But once I joined these, I’m going to make a post inside of the group. And I’m going to give you the wording to use that works so well. So, I joined the group, moving to Charlotte, right? Whatever group that is. And it’s got 40,000 people in it. I make a post in the group that says, does anyone have a house for sale that’s not market ready? I’m looking to buy one in the next two to three months, but wait a minute. Before I hit submit, I’m going to change the background because in Facebook, you could put like the background to be like blue or pink or yellow. You could even use like the poop emoji. I don’t recommend that one, but you stick with the blue or green because it really pops out. And then I’m going to hit submit. And then I’m going to do that four or five or six Facebook groups. So, what happens is if there’s 30, 40,000 people in these groups, and I just put that into five of them, guys, do the math, that’s a lot of people. You’re getting in front of a couple hundred thousand people, but not quite. Because Facebook only shows that post to about six, 7% of the people in that group. That’s still thousands of people that are going to see your post for free. Now, if you do that five or six days a week, I’m going to warn you, people are going to start reaching out to you. They’re either going to comment on the post and say, I have a house I want to sell, or they’re just going to straight DM you. But the thing is, if they’re not friends with you, there’s this message request folder in your messenger. You got to check that because I just opened mine up. I just did a post the other day and I had the four people and they’re like, Hey, I saw your post, I’m going to be selling my house in two months. Hey, I saw your post. I need this thing sold right away. And I’m like, perfect. Now I just start messaging them. Right? So, if you go to our website, creativefinanceplaybook.com, this post is on there, even some instructions. If you missed it, go on there. But then here’s the other gift. For free. It’s the 10 questions that we DM every seller. I do this by messenger. One question at a time. It’s the same question. Now they’re going to tell you about the property, why they want to sell it, how soon, they’re going to tell you what they owe on the mortgage and the way our script works, we ask the seller questions and they make us the offer. So if you’re not great negotiating, don’t matter. Just stick to asking these questions one at a time. And the really motivated people are going to answer them all. They’re going to even tell you if they’re open to terms. And if you find a 7, 8, 9, 10 motivation and you message them, get on the phone call with them. Okay. Call those people after you’ve already answered or they’ve already answered all the questions. Get on the phone. That’s where the magic’s going to happen. When they start giving you a hard time and they don’t want to answer your question, move them to the side, whack those at lightning speed and find the ones that are motivated because there’s actually, I don’t want to sound weird, but there’s a lot of people out there who actually need help. They’re in a bind right now, right? And so the country right now, overall struggling. Groceries are high gases. Everything is expensive right now. And there’s some people who actually need our help. And there are more on Facebook.
JENN:
I feel like it’s such an underused tool. Like, Oh, well, I don’t like Facebook. Well, you like it because maybe you’re using it for the wrong reasons. And so there are people that are older that have homes that are just waiting on the other side of your computer, your phone, whatever. So just like putting it out there really does come right back to you.
CORWYN:
Bam. That is awesome. Guys. Look here. See, I told you listeners, look, let whole way. Some of y’all got to get your church wig back and twist that thing back on. Cause they just moved. Look here. They just moved the whole thing around. You opening hands, shaking me. We’ve done slid off to the side and stuff. This is amazing stuff. This is the stuff. If you will, guys, the dreams are made up. People miss it. Everyone wants to again, go the more typical quote unquote traditional route of this that day in the third. And that’s fine. There’s nothing wrong with it. But there are times there are opportunities that present that allow this to happen. It takes a risk, but the more risk, the greater the reward. Yeah.
JOE:
And can I say one more thing, please? This isn’t just for rental properties. You can buy multifamily. You can do single family. I had somebody did a carwash this way. It works for so many, but if it also works, if you want to buy your own house to live in. I got one of my good friends years ago says, Joe, I have a seller. He’s in a jam. He might be open to terms. We work through it. He gets the deal. He was like, Joe, I made a mistake. I said, what’s that? He’s like, took my wife to the house to show her this rental property and she fell in love. And we’re actually moving into it. And he still owns that house and beautiful family. And they’ve now made it their home. So if you’re even looking for your own home, cause I know what they say is it’s hard for this younger generation to even think of owning a home. If you were like my first deal seller, Steve, and I could buy a house with a hundred bucks down with a $500 payment guys, affordability is out there. You just got to find the motivated sellers and make deals. And it’s a numbers game. So majority of the people are going to say, no good news. We already know that. So the more you’re going to talk to, the more odds are you’re going to have to win, just like the lotto.
CORWYN:
That is awesome. So guys, look, we have definitely blown through our time today, which is amazing. But I still have this question, right? And I refer to this as the Mike draw, the hindsight question that many times we get, which is if you had this thing to do all over again, knowing what you guys know now. And I’m pretty positive where you’re going to go. Cause Jen, I think he was all over it a little while ago, but what would you have done differently or what would you have employed sooner that you believe would have changed your life and catapulted you beyond where you guys are now? What did you learn?
JENN:
I feel like we were trying to do it all ourselves for a very long time. And once we realized it was not hard to bring other people onto our team, teach them and pay them an education. And then also on a commission base, we were able to really start scaling at that point. I was really nervous to start growing a team and having a team member and employees, but you can’t do this alone. You really need to have a great coach or mentor, a community that’s going to support you to answer these questions as they come up and then also like people on your side to help you do all the things. And so I’m type A, I try to do it all myself. That is not the way to go. You need rising tides, rise all boats or something.
CORWYN:
Rising tides raises all boats.
JENN:
Yeah.
CORWYN:
Good. Okay. All right. When I get that. So you guys have gained, you guys are straight. I knew I was going to love this conversation because that is some of the stuff that I’ve been on recently, having secured a property recently, as well as just submitting an offer for another, looking down the road, guys, I want to thank you for sharing your knowledge, your wisdom, providing your insight here to our listeners today. I really appreciate it. I appreciate you guys taking time out of your busy schedules for our listeners, guys, y’all heard where they are. So I need you to go check them out. I need you to log on your favorite podcast app, create a finance playbook. I want you to find, I want you to subscribe. I want you to listen to this show. Yes. I want you to listen to this one too. All right. But I want you to listen to theirs as well, because it’s time for us to grow. It’s time for us to engage. Most importantly, it’s time for us to deploy the resources and the knowledge that we’ve been given and actually bring it to fruition. People work for a result. They work for progress. So it’s time for us to put all that together and make that happen. So Jen and Joe, hey, thank you so much from the bottom of my heart for being a part of this radio show family and being on today.
JENN:
Thank you for having us.
JOE:
Yeah, this is a blast. Great. Thanks so much for having us on. And when we come and come to Charleston next time, we got to come see you live, so can’t wait.
JENN:
Yeah.
CORWYN:
Oh, let’s do it. Let’s make it happen. Love it. So for our listeners, guys, y’all know how I feel. Y’all know what I say. Y’all know I always put the two of those things to you and I give it to you this way, which is to tell you that I love you. I love you. I love you. And we’re going to see you guys out there in those streets.
