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ELF Program

Equipment Lease Financing Program

The financing I use is a form of Equipment Lease Financing. This is just the first part of my “Investment System”. The overall system is self sustaining, and repeatable which, are the two main requirements of any good system.

The way the ELF program works is simple. It is an Equipment Lease with a cash rebate, and the cash rebate is what you use to invest with. There is no connection to the property, so there are no liens or appraisals needed. This also means it will produce 100% financing for both the purchase and the rehab costs.

The mechanics of it are just like if you were to lease a car…with a rebate. The differences are you are actually taking the cash instead of putting it in as part of the down payment (like you would if you were leasing a car), and the size of the rebate. A car rebate is usually in the $500-2500 range. The cash rebate for the ELF is 75% of the lease. That’s not a typo…75%. Why, because the markup for the equipment, high end computer systems, are so high, the provider can give a 75% rebate. Keep in mind the people setting this up are real estate investors as well, so this program is designed with that in mind as the main use for it. The goal is the cash from the rebate here, unlike a car lease’s goal being the car.

The terms are 3-5 years, 6-8% interest, with no pre-pay penalty, and a $1 buyout at the end. The beauty of my system is it has the payoff of the ELF built right into it as you follow the steps.  Here is how I use it:

1 Get the ELF setup
2 Rehabber estimates property for rehab cost
3 I analyze the property for the criteria of my program…which is a least $300/month cashflow after T/I/P/I and fees.
4 Setup LLC for the property and fund it.
5 LLC buys the Property if it meets criteria (see step #3)
6 My Architectural firm does the presentation for what the property will look like after rehab
7 My consulting firm presents this package to my list of tenants waiting for properties in order to lock them up
8 We then present the same package to the end investor with the agreed upon lease from the tenant as part of this presentation. This will verify the cashflow. We will then lock up the end investor.
9 Rehab is completed.
10 Deal is closed…the deal being the sale of the LLC with the property included as its asset. This way, we can make the profit by selling the LLC for what we would have sold the property for…including profit. The LLC has no debt other than what is paid off upon sale, so it is delivered clean to the buyer. The property has no debt since it was paid for and rehab done with cash. No appraisal, thus no LTV, is involved since we are not selling the property…we are selling the LLC, with the property “coming along for the ride”.
11 Repeat steps 2 – 10, over and over again.

Now, the rest of the program is where the real fun begins. After the first deal in the series of deals is completed, we still have to pay off the ELF. We have 3-5 years, and my goal is to take advantage of every month I can before I have to pay the lease off…and in the process, the buildup of debt free cash flow properties. The next steps will do this.

12 When the previous deal is sold, we take the original expenses, purchase + rehab, and repeat with a another deal.
13 We take the profit from the sale of the LLC (step #10), and buy another house…and repeat the above steps with this 2nd property.

The reason for this is simple. We will now have two repeating strings of houses making profits. Once we have established the two lines of repeatable houses, we take…and, since the loan is not directly tied to the property, as in a mortgage or Hard Money loan, we don’t have to pay it off right away…so, we use it again, and again, and..

14 The profit from the strings of houses can be used to:  Pocket as profit, add another string of houses by buying another house and rehab it, add to the Cahs Reserve when it is depleated buying us more leveraged time to use the funds, or…

This step is the most critical part of the system.  This is what allows the system to sustain itself while the rest of the system develops.

15 The profit from the second string goes towards the cash purchase of a house we hold. The cashflow on this house will include the money normally used for the debt service so it will be higher than the goal of $300/month…and, we use the return of the original investment of this house to buy (repeat) the next house in this line.
16 When the debt on the ELF is paid off, we now have all the house strings generating cash flow houses…or still just one with the other generating profits.
17We repeat these steps until we run out of deals (not likely), or just get tired of doing this.

There are variations of this generating more lines of houses (exponential expansion). We can do this because I have a segment of the program that handles the debt service built in.

As you read this you may be saying that most of the steps are being done today…which is true. All I did is put them together in a system. What drives the system is the financing.

If you’d like to discuss this further let me know when…I’d love to answer any questions you may have on this.  Contact me direct at:  joe@thepowerofrealestaenow.com

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