How Creative Investing Works – Jerry Fetta
I know the title of this article doesn’t help. Creative investing is industry jargon. It doesn’t tell us anything about what’s being invested in! I bring this up with a purpose. Most people who are in the “creative investing” space don’t necessarily want everyone to know what it is. Why? Because the opportunity is so huge! Today I am going to break it down for you!
Invest means “to clothe your capital (money). So creative investing is a way to invest your money and the word creative suggests that it is done in an imaginative, extraordinary way. To be imaginative and extraordinary, what can we not be? Normal. Normal means stocks, bonds, mutual funds, annuities, ETF’s, day trading, life insurance, and all of the other products and services that everybody already has. There is nothing creative about those. So creative investing, by definition cannot include those vehicles.
Find an asset. Creative investing centers around a real asset that has intrinsic value and produces income. What does this usually infer? Real estate will often be involved. Why? Because it is real. It’s not an invisible thing called a share that you can never actually prove exists. It has a well, septic, and opportunity to build, lease, and sell. It can produce an income by putting a home or business on it or leasing to somebody who wants to put a home or business on it. This is an asset. Are there other assets aside from real estate? Yes. But real estate is the most common so we are going to keep our focus here.
Somebody is going to buy the asset. Either you will buy the asset yourself or somebody else will want to buy it. Either way, the buyer will need money. The buyer can either use their own money, or somebody else’s. Often times, the buyer will want to use somebody else’s. This is where you can make your play. An investor will often pay a private lender 8-10% annually to use the lender’s money to purchase an asset. You can be that lender. This means all you have to do is lend your money for a set term length at a set interest rate, make sure your investment is secured by the asset, and begin collecting interest. No work involved! Or you can be the borrower. This means you’ll find potential lenders, pitch them your deal, borrow their funds, and pay them back out of your cash flow from the deal.
The asset produces income. With real estate the asset is usually rented out to a tenant, or owner financed to a buyer. Once the investor secures the asset they will usually owner finance it to someone. Why? Because an owner finance deal doesn’t require a landlord. Owner finance means that the owner will sell it to the buyer and the buyer will become the new owner and will make payments to the now previous owner. The previous owner doesn’t have to fix the toilets, clean up when the tenants trash the place, or evict people. This is genius because the cash flow shows up with significantly less work! If you’ve loaned money to purchase this asset, your funds went to the investor, the investor purchased an asset, owner financed the asset to a buyer, now collects a mortgage payment from the buyer, and pays you back with the mortgage payment each month.
It really is that simple. As you can see, this is why it is called creative. But at the end of the day, isn’t that a whole lot easier to understand than the stock market? Somebody bought something with someone else’s money. They pay that someone else an interest rate for borrowing. The money is used to buy a cash flowing asset. The cash flowing asset is owner financed to a buyer. The buyer pays the mortgage. The mortgage pays the lender back.
Investing should make sense on a napkin. If an investment takes lots of long explanations it means you should not do it. Period. Math is simple. If it is not simple, that means there are things other than math at play. Your investments have no room for things other than math.
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Own Your Potential!
Jerry Fetta is a husband, son of Yahweh, Entrepreneur and owner of 5 privately held businesses. Jerry lives in Alaska with his wife and 2 dogs. His no-nonsense approach to business, finances, and life speaks truth and provides clarity to his clients and followers. His personal mission in life is to empower millions of leaders to own their God-given, ultimate potential