ADV Homebuyer Buy Now! Program Overview

ADV Homebuyer Buy Now! Program Overview

It s a Booming Home Market! In North Texas, home prices have increased by 40% over the last 6 years Only 2% of the homes in Texas are underwater, the lowest in the nation (report by CoreLogic) Rent rates have increased drastically due to very low supply of housing, despite record construction. Currently, renters are spending 29% of their monthly income on rent. Pressure is compelling more families to buy homes.

The Need For Financing Is Very Significant In 2015, about 12% of the home buyers who applied for a traditional, conforming mortgage loan (Fannie Mae and Freddie Mac) were denied loans. Based on the home sales statistics, this is about $140 Billion in denied loans. The actual figure is much higher as many don t even apply for a mortgage.

The Alternate Solution! On average 6% of residential sales involve some sort of seller financing. The seller carry-back makes the lion s share of the cash flow note business The 6% statistic has been steady over the last 20+ years In 2015, there were 5,250,000 existing home sales with a median price of $222,400 (Source: National Association of Realtors) 6% results in roughly $70 billion of seller financed cash flow notes in just one year!

The ADV Platform ADV has implemented a platform for home buyers seeking non-traditional mortgages from private investors (like owner financing) to address the significant demand. Bank interest rates are at historically lows... great time for investors to finance homes backed by 1 st liens. Investors get higher returns for their investments in homes while helping buyers get the homes they want. Buyers may refinance in 3-5 years to traditional loans. This is Smart Investment Alternative where both home buyers and Investors benefit

Why Use Private Investors? Private Investors fill a void where institutional lenders (banks) are not lending. Below are some examples where banks may not lend: Buyer has a low credit score Buyer has higher debt/income ratio Buyer has financed too many properties (Fannie Mae/Freddie Mac) Buyer s loan size if too small (most banks require $75K minimum) Buyer is a trust, company or retire account and no personal guaranty is available If a note is not paid, the investor can foreclose on the property and in many cases resell for higher profit.

How Investors Earn Cash-flow Investors generate cash-flow using the concept of Arbitrage Borrow at one rate and lend at a higher rate. All banks work on the principal of arbitrage If you borrow money against your primary residence at 5% and lend it at 10% with little risk, you are doing the same thing.

Homebuyer Bottom Line Comparison: Buy Vs. Rent ESTIMATED COMPARISON BUY RENT Delta Purchase Price $275,000 Refinance after 3 Years Down Payment 15% Mortgage Rate 9.9% Income Tax Bracket 25% Est. Buying Costs 8% Selling Costs (no cost refi) 0% Price and Rent Appreciation 4% Est. All-in Net Bottom Line Cost/Mo $2,100 $2,000 $100 After Refi @ 4% Effective Cost/Mo $1,150 $2,000 -$950 Note: Actual figures may vary based on terms of the deal.

Deal Example Homebuyer wants property Buyer s loan options are limited Buyer has resources to pay payments (income) Buyer makes promise to pay, Investor accepts Investor closes with seller and buyer Buyer makes payments

Our Investor Financing Process ADV PLATFORM BUYERS PICKS A HOME OF THEIR CHOICE INVESTOR USES HIS CASH/CREDIT TO BUY THE HOME FROM SELLER THEN ACCEPTS NOTE AND DEED OF TRUST FROM BUYER (OWNER FINANCE) LOAN SERVICER BUYER PAYS THE INVESTOR AMOUNT SPECIFIED ON THE NOTE AT A HIGHER INTEREST RATE

Parties Involved SELLER REALTOR INVESTOR BANK BUYER REALTOR ADV LOAN SERVICE COMPANY ESCROW TITLE CO ATTORNEY APPRAISALS INSPECTIONS ETC

Buyer Benefits Pick the home they want to live in Go from renters to homeowners Bottom line cost is close to rental rate Protect against significant increases in living expenses, hedge for inflation Start building equity and create wealth Terms of deal are negotiable Property value more significant

Investor Benefits One of the lower risk ways to invest in real estate For leveraged investments, returns are higher than rentals Passive Investment (no need to repair, etc.) Steady Cash Flow (income) Excellent vehicle for self-directed IRA accounts Avoids lump sum income taxes Note and Trust deed are Marketable Structure customized to their situation

Seller Benefits Get the right price for the home Get better price when market is softer Sell faster (more buyers) May close faster Avoid We Buy Houses type scammers that underpay the value of the home

Realtor Benefits Sell more homes (more commissions) Manage buyers or sellers expectations Over 80% of active agents have never participated in seller financing transaction. Become educated in investor financing matters and benefits to parties May be seen as a hero by buyer and seller at successful close in investor financed transaction, get more referrals

Expected Investor Returns Non-Leveraged: 9-10% APY Leveraged: 20-50+ % APY Figures may change based on % leveraged, bank loan rate, % down payment by buyer and term of loans (typically 30 year fixed). Ideal for Investor is 85% LTV loan at 5% APR or less Minimum 15% down payment from buyer.

Fee Structure Homebuyer ADV Enrollment fee ADV Service Fee Closing Costs Home Insurance Loan Servicing Fees (loans are escrowed) Investor Initial Closing Costs (reimbursed by buyer)

Conclusion Its a Win-Win Solution All Around: Buyers win: get to buy the house they want with bottom-line cost close to rental rates Investors win: excellent secured passive returns Sellers win: more buyers Realtors win: increased closings & commissions ADV wins: help more families get homes