Blair Halver
What Is A “Self Funding” Real Estate Portfolio Blair Halver

For Busy Professionals, Entrepreneurs, and Business Owners who want to make above-average returns on their capital…

This house essentially “bought itself”.

If you’ve been looking into turnkey rental properties as a way to put your capital to work, and you want to make sure you’re getting the biggest bang for your buck in terms of your return on investment…

You need to read this whole article because it might just be the turning point in your investing career.

You see, for the past several years now I’ve been quietly amassing a multi-million dollar portfolio of cash-flowing single-family rental properties that require very little time and expense to manage, and effectively give me triple-digit first-year cash-on-cash returns.

Yes, you read that right. Triple-digit cash-on-cash returns.

As of this writing, YTD for 2019, I’ve collected over $216,000 in passive rental income on approximately $2.5M worth of real estate, all acquired without having to qualify for or sign on any bank loans (nothing shows on my credit report), or pay any large down payments (max 2%, yes, TWO PERCENT).

Sounds too good to be true, doesn’t it?

Well, if you think so, then ok, you can skip the rest of this article. But if you’re still with me, let’s continue because…

This is how the insiders do it, while everyone else is playing by the conventional rules which have been designed by the banks and realtors to line their own pockets.

What I do, and what I teach my colleagues and clients how to do, is acquire properties using a strategy we call “Equity Annuitization”.

We go to the seller of a property, and we say, “how would you like to turn the equity in your property into an annuity?”

When they say, “yes, that sounds good…” then we explain how we can do just that.

We do this by using a tactic we call a Delayed Cash Sale, or “DC” Sale for short.

A DC Sale is very simple: we agree to buy the property from the seller, but he doesn’t get all of his cash the day we buy it.

The cash to the seller is “delayed”, or rather, it’s paid to him over time in regular monthly installments, just like an annuity.

Because what this Delayed Cash Sale method allows us to do is get into every property we buy as “light” as possible, meaning, with as little cash out of pocket as possible on the front end (i.e. usually zero up front cost), and it gives us a long time to pay off the seller.

The beauty of this is that because the seller is giving us TIME to pay them off in full, with little to no cash out of pocket on the front-end, we are then able to give them a higher price than any other investor-buyer he’s likely talking to.

This allows us to make a better offer to the seller, and therefore beat out every other investor, and buy more properties.

Now of course, the acquisition is just the first component of getting triple-digit cash-on-cash returns.

The second component is our “exit”, which I’ll talk about next, and then show you a couple real world examples of exactly how we get these triple-digit returns.

You’ve probably heard it before, but in any real estate investment, you need to know your exit before you get into the deal. Well it’s no different here.

So let’s look at what our options are for the exit on a deal like this.

There are two “conventional” options:

  1. If you’re walking into enough free equity in the property (in other words, you’re getting a big enough discount on the price), you could choose to simply sell it immediately and make a quick $10–20k cash, depending on the deal. This is also known as “flipping” it (whether you actually do any work to the property or not). This is a fair option as it does put a chunk of change in your pocket — can’t complain about that. But then again, you’re still not building passive income, cash-flow, and wealth, which is what we’re really after here, aren’t we?
  2. Your second option would be to go the traditional route and just hire a property manager to put a tenant in the property and start collecting rent. This is also a decent option, because you’re likely going to be putting a few hundred bucks cash flow into your pocket every month, plus you’ll be getting all the benefits of owning the property: debt pay-down, depreciation, appreciation, tax write-offs, etc.

But what if there was a better way?

A way that combined the best of both options 1 and 2 above?

Well, there definitely IS a better way, and it’s kind of a “hybrid” of the first two options where you get the big chunk of cash now as if you flipped it, but you still get the monthly cash flow just like if you rented it.

How do we do this?

You guessed it — with the same “Delayed Cash Sale” method we used on our acquisition.

So instead of just flipping the property, or instead of just putting a regular tenant in there, we sell the property using a Delayed Cash Sale.

Just like on our acquisition, because we are giving our buyer TIME to pay us off in full, they are willing to pay a PREMIUM PRICE for the property.

From our perspective now as the seller, there are several reasons we like this:

  • We get a big chunk of cash up front from our buyer in the form of a down payment or option fee. This means we get to capture some, if not all, of our equity in the property on day one, and immediately convert it into cash. Remember — you can’t eat equity. But cash is king. We never want to bury cash in real estate.
  • We continue to receive monthly income from our buyer as he continues to pay us for the property over time. We then use this monthly payment from our buyer to turn around and send the monthly payment to our original seller (and pocket the difference).
  • If and when the buyer ever refinances the property in the future (i.e. they go get a traditional mortgage and cash us out) any remaining or accumulated equity in the property comes to us in the form of another large chunk of cash.
  • Because our buyer isn’t just a regular tenant, they are responsible for all the maintenance and repairs on the property, so we don’t have deal with any of the typical hassles associated with rental properties.
  • If the buyer ever stops making his monthly payment to us, we take the house back and do it all again — we find a new buyer to come give us another down payment and wash, rinse, repeat.

So let’s see, if you choose to use a Delayed Cash Sale for your exit, you get someone to move into your house, pay you a large fee to do so, pay you money every month so you get debt pay-down plus cashflow, they take care of all the maintenance and repairs, and they treat the house as if it’s their own.

How could you get any better than that?

That down payment from the buyer is how you as the investor get ridiculous triple-digit returns on your money.

Because even if you put $10k of your cash into a property as a down payment to a seller, or maybe you wanted to spend some money to fix up the house a little bit before you sell it…

You’re going to turn around and sell it with a Delayed Cash Sale and usually collect $10k+ as a down payment from your buyer, which means now you’ve got all your cash back out of the deal, and everything after that is free money.

For professional investors, it’s not about the return ON your capital, but rather the return OF your capital.

In other words, how quickly can you get your CASH back out of the deal so you can go do another deal, and keep the asset for free?

How many cash-flowing properties could you buy if every time you bought one, your net cash position actually INCREASED?

Like I said, this the way the insiders do it. The professionals.

This is NOT the way the banks want you to do it, nor do 98% of realtors out there (because it cuts them out of the deal!).

In my mind, there is no reason to ever just put a regular tenant in a house anymore if you can do a Delayed Cash Sale like this.

Even if you only got a couple thousand bucks down payment from your buyer, but you wouldn’t be responsible for maintenance and repairs, you’d STILL come out ahead over a regular rental.

So why don’t more investors use this as an exit strategy?

I have no idea. I’ve been preaching it from the mountaintops since I started.

It combines the best of both worlds: chunks of cash like you get in flipping, and monthly passive income like you get with buy-and-hold, without most of the hassles of either option!

Let’s take a look at a couple example deals from my own portfolio to illustrate this:

Free & Clear in Charlotte, NC

Free & Clear House, $413k

A couple months ago I bought a house from a seller in Charlotte for $413k. The house was probably only worth $430k tops. It was in pristine condition, didn’t need any work, and was a beautiful home in a great area. It even had a little pond in the back of the house.

The seller owned it free and clear, and I believe he had been trying to sell it for some time. They had already moved up to their dream home in the mountains, about 3 hours away.

At this point, the seller was simply tired of driving back down to Charlotte every other week to check on the house.

He didn’t need the money — they had plenty of money. He didn’t have a mortgage payment on it, so he didn’t need debt relief either. He just simply wanted it off his plate.

So I negotiated to buy the house from him with the Delayed Cash Sale method. We haggled a little bit, but ended up agreeing to $5,000 down, and $1,200/mo at 0% interest, and I’d pay the taxes and insurance on top of that each month.

I then turned around and sold the house for $449,900 on a DC Sale to a buyer who gave me $45,000 for the down payment, and is paying me a $2,000/mo. I set the payoff term to 30 months, meaning they would need to go get a traditional mortgage and refinance me out within that time frame.

What I don’t tell them is that if they don’t refinance and cash me out before 30 months is up, that’s ok with me — as long as they’re making the monthly payment and taking care of the house, they can stay as long as they want.

Because the longer they do, the more money I make on the deal.

So how did I come out on the deal?

Front-End Profit: $45k down payment from the buyer less the $5k I paid to the seller, less closing costs of about $1,500 = $38,500 immediate cash profit

Monthly Cash Flow: $2,000 monthly income from the buyer, less the $1,200 to the seller and $300 to taxes and insurance = approximately $500/mo cash profit

Back-End Equity: $449,900 less the buyer’s $45,000 down payment, less my $413,000 purchase price, plus the $5,000 I paid to the seller as a down payment, plus the $1,200/mo principal-only payments I’m making to him. So if the deal goes the full 30 months with my buyer, my back-end payday will be $32,900 cash profit if/when the buyer gets their own mortgage.

Total Profit: $86,400

First Year Cash-on-Cash Return: 784%
($45k down payment + 12mos of $500/mo cashflow) / ($5,000 down payment + $1,500 closing costs)

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