Podcast Summary: Real Estate Investing School Podcast - Episode 212: REAL DEAL: How to Get a $13k Credit on Your Next Deal with The Cowboy Consultant
Host: Brody Fossett
Guest: Jason Griffin
Release Date: November 21, 2024
Introduction to the Real Deal Series
In Episode 212 of the Real Estate Investing School Podcast, host Brody Fossett delves into the Real Deal series, which focuses on dissecting specific real estate deals to extract valuable lessons and strategies. This episode features a unique segment derived from a live call, providing listeners with firsthand insights into innovative funding mechanisms in real estate investments.
Market Insights and Current Trends
Brody Fossett opens the discussion by highlighting the dynamic changes in the real estate market, influenced by recent political shifts, Federal Reserve policies, and fluctuating interest rates. These factors significantly impact investors striving for financial independence and control over their financial futures.
Brody Fossett [00:21]: "We want to be aware of what's the market doing, what are the Feds doing, what are the rates look like, how does that affect us as investors..."
Introducing Jason Griffin and His Expertise
Jason Griffin, a key figure in the funding calls at Real Estate Investing School, is introduced as an expert in real estate financing. His extensive knowledge encompasses various lending criteria and strategies essential for securing optimal funding for real estate deals.
Brody Fossett [00:38]: "Jason Griffin... knows the ins and outs of pretty much everything when it comes to financing, real estate and lending and all the criteria and hoops you need to jump through..."
The Solar-FHA Loan Program: An Innovative Funding Solution
The core of the episode revolves around a groundbreaking program that integrates solar energy systems with FHA loans, offering borrowers a substantial $13,000 credit towards their down payment. This initiative is likened to Fannie Mae and Freddie Mac programs but stands out by seamlessly incorporating solar installations into the home financing process.
Brody Fossett [02:04]: "One of the things that he talked about throughout this call were some of the options and things available... a solar program... they'll give you a $13,000 credit towards your down payment."
Detailed Breakdown of the Program
Jason Griffin provides an in-depth explanation of the program:
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Educational Component: Borrowers must complete a six to eight-hour online course covering FHA loans, solar and wind technologies, and sustainable living practices.
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Earning the Credit: Upon course completion, borrowers earn a credit equivalent to 3.5% of the home's sales price, capped at $13,000. For instance, a $400,000 home purchase would yield approximately $13,000 towards the down payment.
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Flexibility in Usage: The earned credit isn't restricted to just the down payment. Borrowers can allocate it toward closing costs, debt repayment, or even personal expenses post-purchase.
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Tax Incentives: The program offers a 30% tax credit on the solar installation, providing additional financial benefits over time.
Unknown Speaker [04:32]: "Simply Solar... the borrower can actually earn their down payment... up to 13,000... You can just put that in the coffers because, and you can also team this with down payment assistance programs."
Benefits and Long-Term Advantages
The integration of solar systems into FHA loans presents multiple advantages:
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Financial Leverage: By securing a $13,000 credit, buyers can reduce their out-of-pocket expenses, making homeownership more accessible.
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Energy Savings: A solar-powered home significantly lowers utility bills, offering long-term savings.
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Property Value Enhancement: While the solar system may not add dollar-for-dollar value, it increases the home's market appeal and overall value.
Unknown Speaker [11:55]: "There's a 30% tax credit with this solar thing... you're saving, what is that, $3,600 bucks a year... pretty soon you've recouped that $40,000 and then some."
Geographical Availability and Loan Limits
The program is currently available in select states, including California, Arizona, Nevada, Utah, Texas, Idaho, Colorado, and Florida, with plans to expand to Illinois, Pennsylvania, New Jersey, Oklahoma, Kansas, Missouri, North Carolina, South Carolina, and New Mexico.
Jason emphasizes the importance of understanding FHA loan limits, which vary by county. For example, in Iron County, Utah, the FHA loan limit is $484,000. Buyers looking to purchase higher-priced homes may need to bridge the gap between the loan limit and the home price through additional down payments or supplemental financing.
Unknown Speaker [11:55]: "FHA has loan limits in every county... if you're buying a $500,000 house and the loan limit is 484, then you have to come up with $16,000 down..."
Strategies to Maximize the Program
Listeners are guided through practical strategies to fully leverage the solar-FHA program:
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Combining Assistance Programs: Pairing the solar program with other down payment assistance initiatives can cover more substantial portions of the down payment, reducing the financial burden further.
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Manual Underwriting: For borrowers who might not meet standard FHA criteria, manual underwriting based on compensating factors (like strong credit history or significant reserves) can provide alternative approval pathways.
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Partnering for Investment: Jason recommends partnering with family members or close associates to utilize multiple benefits of the program, such as purchasing multi-unit properties or house hacking, thereby maximizing returns and minimizing individual expenses.
Jason Griffin [14:35]: "You can team this with down payment assistance loans to get where you need to be... It's a great program to partner with."
Case Study: Hypothetical Deal Scenario
To illustrate the program's potential, Brody and Jason walk through a hypothetical deal:
- Property Price: $500,000
- FHA Loan Limit: $484,000 (Iron County example)
- Earned Credit: $13,000 applied towards down payment
- Solar System Cost: $40,000 financed into the loan
- Tax Credit: 30% of solar cost ($12,000)
- Outcome: After applying the credit and tax incentives, the borrower effectively reduces the initial financial outlay and benefits from long-term energy savings, achieving a high cash-on-cash return.
Brody Fossett [04:32]: "With this, you can acquire a million plus dollar asset in most of your cases and do that with around $20,000 and get a 50 plus percent cash on cash return."
Conclusion and Key Takeaways
The episode concludes by reinforcing the viability and advantages of integrating solar systems with FHA loans. This innovative approach not only facilitates easier homeownership through substantial down payment credits but also promotes sustainable living and long-term financial benefits.
Brody Fossett [26:31]: "Thanks so much for tuning in today. We'll catch you on the next episode."
Key Takeaways:
- Innovative Funding: The solar-FHA program offers a unique way to secure significant down payment credits, making real estate investments more accessible.
- Multiple Benefits: Beyond down payment assistance, the program provides tax incentives and energy savings, enhancing overall investment returns.
- Strategic Utilization: Combining this program with other assistance initiatives and strategic partnering can amplify benefits and facilitate more substantial real estate deals.
- Geographical Considerations: Understanding local FHA loan limits is crucial for effectively applying the program to desired properties.
For real estate investors seeking to maximize their funding strategies, Episode 212 provides valuable insights into leveraging innovative programs that blend sustainability with financial acumen.