Barter In The
st 21
Century?
If I have what you want ... And you have what I want ... Do we really need the guy in the middle?
Why Cant We Just Do The Deal? G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Direct Lending, Borrowing & st The 21 Century Barter Economy Q. What is Barter? A. I have eggs. You have milk. We trade. It works well when I have eggs and want milk. & you have milk and want eggs. #1 way of commerce in primitive agrarian economies Doesn’t work so well in complex industrialized economies. G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Direct Lending and Borrowing Q. What is Direct Lending? A. You have some money and would like to earn some interest. I would like to borrow some money for your project. Works well if borrowers and lenders can find each other* which has been difficult with the fragmentation brought by the industrial revolution
*Knowledge, Trust, Confidence also required (None of these are taught in school) G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
What’s The Objective? The Bottom Line Find your own buyers and find your own lenders and put them together. Eliminate the bankers, brokers, agents, & appraisers The (significant) savings can finance the energy package. Or your 401K or ........ G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
The End Of Barter & Direct? th 20
By the late century, life had become so complex and fragmented that Barter and Direct Selling, and Borrowing had become almost impossible except on a very small scale. G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
... Then There Was The Internet... And everything began to change. Or at least it can change. The world is small again. Buyers and Lenders for our projects can live thousands of miles away. They are getting more used to shopping on the internet all the time. Example: One of our buyers was getting out of the Navy in Virginia & shopping for a home in California & found us on Craig’s List. G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Some Are Invested In You Not Taking Personal Responsibility The whole complex of bankers, brokers, agents, appraisers and government regulators would all like to keep and expand their jobs. (They dont need to worry. Only a few will get off the couch and learn how to blend these ancient forms of commerce into the 21st century.) How about you? G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Did School Prepare You? There is little in a Public School curriculum that prepares us for the skills required of an Energy Wise House Flipper. Balancing a checkbook, writing a contract and starting a small business should be taught in school but these are rarely taught. The public school objective seems to be to produce employees for big corporations or government. So we need to Un-learn ... And re-learn some things Saving The Planet some things... our grandparents knew One House G r e e n E a r t h E q u i t i e s . C o m
Š 2010
At A Time
Q. How about the trust issue? Dont we need the government to protect us? There are unscrupulous people out there who take advantage of little old ladies.... But how well have all the regulators protected the public in recent years? You might want to trust your own integrity more than the government and big banks Personal Responsibility, A novel concept these days, but one familiar to our founders. G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Simplify, Simplify, Simplify! Get the education to be able to remove the middlemen in the middle of your deal that you dont really need. Find your buyer Find your lender
Do The Deal!
G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Safe = Disclose, Disclose, Disclose Always disclose everything you know about a house. You cant disclose “too much” Let the buyer be bored with all the disclosure. (Attorneys are out there)
Under Promise & Over Deliver
G r e e n E a r t h E q u i t i e s . C o m
© 2010
Saving The Planet One House At A Time
Who Do You Know? ... 1. Who is tired of having their money earn 2-3% in the bank? 2. And complains about it?
Perfect Candidate For Direct Lending
3. And has seen their retirement plan shrink with Government protected investments? 4. And they like the idea of Green Investment? 5. And they trust you? G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Example #1 1. Find a person who wants to lend some money, the amount of a completed project. For example $200,000 2. They make a loan to you, knowing that it will be assumed by the ultimate buyer. 3. You buy the property and renovate it. Either you or they hold title. 4. You find the buyer. The lender can have input to the decision. 5. You sell for a higher price. Say $220,000 With $20,000 down You keep this money or carry it, if the buyer doesn't have $20 For example they give you 10 and you carry 10 as a second. 6. The buyer assumes the loan and moves in 7. Title could stay with the lender as in a Contract of Sale-Land Contract 8. Or title could transfer and the lender would have a first deed of trust. 9. Additional security for the lender is in the down payment. 10. You can guarantee with a buyer replacement or a buy back program. 11. Lender is happy to be earning 6% vs 2% - secured by totally first lien on completely renovated property where everything is brand new and happy to be doing their part to
You have avoided commission, loan fees, and appraisal fighting... And sold for a higher price G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Variations On The Theme 1. Lender can hold and keep the title for added security. Buyer’s interest is in the contract. Advantage: Easier to foreclose Lender may feel more secure. Disadvantage: Buyer may feel less secure without the deed. 1b. Title may transfer to buyer. Lender has a first lien on the property as security.
G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Variations 2 Rather than assuming the loan, a separate transaction and separate loan documents could be drawn. By lending only 90% or 80% of the sale price, the lender is secured in case of default. Hopefully you can collect the 10 or 20% down payment. If not, collect at least part of it and carry the rest. G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Variations 3 Some direct lenders would love to have rental income from their investment. Your job would be to find & purchase the property, renovate it and screen and place the tenant and turn over a completed and “performing� property to the lender. Again, they get to know that they are saving the planet. (some people dont care about this, but more and more are beginning to ... And you only need one! G r e e n E a r t h E q u i t i e s . C o m
Š 2010
Saving The Planet One House At A Time
Notes 1 Bad things happen to good people. It’s the way of the world, especially in recent years. Your job in deciding who to lend to is to discern which ones just had some bad luck and are deserving a second chance from those who haven’t learned anything and will get themselves in trouble again. You can take into account things that Bank of America cannot. G r e e n E a r t h E q u i t i e s . C o m
© 2010
Saving The Planet One House At A Time
Notes 2 This is a two phase work in process of replacing middlemen and service providers and lenders in our projects ... So that we’ll have more money available to put toward our mission. We are fairly well developed in making our own sales. Lot’s of work yet to do on facilitating Direct Lending ... We need your help. None of us are as smart as all of us. We will keep reporting our results in this venue and in GEAR G r e e n E a r t h E q u i t i e s . C o m
© 2010
Saving The Planet One House At A Time