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Creative Financing: One Investor’s Path

Jay Chekansky found creative financing on the recommendation of a friend, and stuck with it because it fit his personality. How did this former engineer-turned house-flipper shift his mindset to financing? We were wondering the same thing. 

Jay got into the real estate industry doing fix and flips, taking on most of the work himself. He realized he could only flip 2-3 homes per year that way, and wanted to build a real business. By examining his own skills managing the flips, he realized it would remain a side hustle unless he made a change. An investor friend introduced him to creative financing and selling, and Jay started creating seller financing notes. 

He realized he was made for this new venture, and working with investors was refreshing. Instead of focusing on the appearance and features of the home, like retail buyers, investors are looking at the value and down payment costs of the home. Their priorities are definitely different. 

What’s Jay’s investment process?

Jay finds homes through typical marketing tactics, looking for motivated leads. He has had great luck on the traditional MLS, buying for better than a fix-and-flip deal and then reselling. 

  1. Look at home listings. 
  2. Do the math. Estimate the rental price, subtract taxes, insurance, and third party loan servicing. That gives you a ballpark PI (principal and interest). Calculate a range of 15-20 year loan terms, see if a down payment makes sense, and make an offer in the 50-60% range of the owner finance value.
  3. Marketing. Set up bandit signs, list homes on social media, Zillow… everything but the MLS. This way, Jay avoids retail buyers and still gets plenty of leads.

When buying, he gives his lenders the first position on the deal and takes the second note.This may seem risky, but he outlines this clearly with a contract and protects that investor. Jay is using a trust to buy the title, which is different than an LLC. This provides asset protection to the beneficiary.

It definitely took effort to find these types of lenders, but once he figured out who they are, it became more simple. He’s borrowing money on a short term with the goal of cash flow. Jay has figured out a compelling way to shuffle the money around so he never gets too far in the hole and is covered in risky situations.

Want to get started with creative financing?

“Learn how money works, or you’ll always work for someone who does.” 

There are plenty of resources, including YouTube, to show you how. Explore loan, lending and borrowing scenarios. One of Jay’s favorite podcasts is The Creative Financing Podcast with Jeff Rappaport. Jimmy Napier’s book Invest in Debt is also a good resource. The same techniques you use to sell a home on terms, you can use to buy a home on terms. It’s all about creativity. 

Don’t forget to ask for amended terms – you can usually get what you want. There are lots of options, and he wants to offer a variety to buyers, in order to get a yes. 

One important thing to keep in mind: if you’re not comfortable owning the home, don’t make the loan. Worst case and best case scenarios are usually opposite, so be ready for both of those situations and everything in between. 

Jay has a credibility package put together with his experience and examples of deals in the past. This way, he can show investors the best thing to do with their money and the ways it will work for them. This may help change their mind to make a better deal for both parties. 

Primarily, Jay sells notes. He’s bought a few, making sure to include provisions in the contract. He’s still in a wealth-building mode, so he’s selling to make that happen. When putting homes on Facebook Marketplace, he gets contacted by brokers all over the country. By building a network this way, he can reach out to those same folks to sell a note later. 

Know your “why”

Jay gets an overwhelming sense of happiness when helping people buy homes. It’s a great feeling knowing he’s made it happen for them. Also, flipping homes was simply frustrating for Jay. instead of trying to work through new issues that arise, he likes to work with pros for smooth transactions every time. 

At the end of the day, Jay believes home ownership is a smart goal for everyone. In his view, it boosts neighborhoods and communities, and he takes pride in making that possible. By using third-party loan originators to qualify buyers, he’s helping those who wouldn’t be able to otherwise purchase a home. 

He’s constantly striving, taking action every day, and aiming to create better value for buyers and investors. With every deal, Jay tries to challenge himself a little deeper. He wants to eliminate steps in the process every time to make it more efficient and get more profit with less effort — in a sense, working smarter and not harder. 

What was the true turning point for Jay? Listen to our podcast episode to find out and learn more excellent tips!

Contact Jay via email at [email protected] or on Instagram @jchek779.