Creative Financing and Consolidation Loans
Andrew, from Barbados sent me the following true story about
creative financing and using a consolidation loan. To translate
the numbers from Barbados Dollars to US Dollars you can just
divide them by two (as of the 12/5/11 exchange rate). I love
the creativity and persistence Andrew demonstrates in these transactions.
Consolidate for Cash ... Well, Profit
By Andrew Murray
As Benjamin Franklin said: "A penny saved is a penny
earned" and this story is more about saving than receiving
cash, although you can modify the strategy and get cash at the
end if you so wish.
When we think about it, if you could make $200,000 now what
would you DO with it? Put it on the bank and feel $200,000 richer
or BUY something? We all want money to buy things at the end
of the day anyway right? If money couldn't buy things we wouldn't
want it to begin with.
I digress, here is my story, it is true.
I found a beautiful black sports car advertised in the newspapers,
it was valued at $76,500.00 and I had about $8000.00 at the time.
The owner was asking $60,000.00 as he was in deep need of cash
and the bank was about to repossess it. We talked back and forth
for a total of about eight weeks trying to come to an agreement
because I really wanted it but he wasn't willing to part with
it without receiving his asking price. I paid the bank a months
installment for it to stop the repossession from taking place
and we continued negotiating. Selling this car would leave him
without transportation so my offer to just take it and pay the
bank what he owed on it monthly (and also send a monthly payment
to him) wasn't too attractive in his opinion. Then I had an idea;
what if I bought a car and gave him and then paid the bank monthly
for his car after he "gave" it to me? He didn't like
that idea either but was running out of options. I bought a car
for $6,500.00 and after a couple weeks of wrangling got him to
take it from me and give me his.
This situation wasn't perfect as the car I got from him was
still in his name, I had many expenses to cover, I still needed
to buy it outright. He reduced the price to $55,000.00 and introduced
me to his bank manager. Remember that I now had NO money, I had
bought that $6,500.00 car for him and spent the rest; part on
insurance and part on road taxes on BOTH the cars.
As we all know when people go to banks for loans they are
required to have a down payment; since I had NO money, I got
a letter from him stating that I gave him $6,000.00 (which I
did in a sense) and that he was therefore now owed just $49,000.00.
The bank officer agreed and gave me the loan. I had the car,
he had his $49K, and a car as well, and everyone was happy.
Now about the penny being saved? First of all I got a $76,500.00
car for $55,000.00 but I only ended up paying about $18,000.00
for it.
How?
Well a couple months after the transaction, I got tired of
having to make the loan repayment of $1300.00 each month as I
wasn't making that much money to begin with so I decided that
I need to get rid of this debt (but keep the car of course) so
I introduced an idea to a couple family members that were interested
in purchasing real estate that we should all consolidate our
debts into that property and get them practically free.
The value of the property in question was over a million dollars,
we were buying it at a steep discount, $350K to be exact, meaning
that we had over $650K in equity on it. We put ALL our debts
into a 30 year mortgage, vehicles (including my car of course)
other loans and items and the total came up to $653K, still over
$300K under the property value. (We didn't make any down payment
on the mortgage either but that is a different story.)
So to sum it all up, we got vehicles, a three and a half acre
property and house, (which can pay for itself) and hundreds of
thousands of dollars worth of stuff for just a $4K per month
payment with NO money down; AND I'm currently crafting a plan
to have this 30 year mortgage paid off in less than 30 months!
That was a little more than just "a penny" saved.
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