Finding Owner Financing

[Adam Rothweiler]

Hi everyone! I was wondering what avenues you've found to find deals with property owners who are more likely to seller finance/own their property free and clear. I'm a new investor and I've been analyzing deals for wholesale, looked into low money down options like FHA, but since I have little capital to get myself started with my first house hack, I believe my best option to be a seller financed multi family. Finding MFR with full equity seems to be a shot in the dark though. I was wondering how you all have found seller financing deals in the past. Do you go to the city and look at property records? Do you call a massive list of property owners and just hope one Of them owns free and clear? I did call a few companies who manage a large number of properties for their owners and asked if they have any clients who are looking to sell through seller financing and was told I'd be emailed should something that was similar to my criteria become available, but I want to be more proactive than that. Any advice helps! Thanks!

[Jay DeCima]

Adam

When you borrow money from banks to finance real estate, you’ll quickly discover that a group of rental houses and small apartments, properties with more than four units are a whole different kettle of fish than financing the home you live in! Mortgage money for investment properties is generally classified as commercial lending and most always comes at a much higher cost than residential loans. The reason is because bankers feel commercial loans are much more risky than a homeowner’s personal residence.

Seller financing happens when a property owner sells his property and agrees to carry back or finance the amount of the sale, less the amount received for a down payment. Say for example; he selling price is $100,000 and the down payment is $10,000. In this case, the seller would agree to finance the balance of the sale price, which equals $90,000. In other words, the seller substitutes himself in the place of a bank or some other institutional lender.

When you develop the skills to negotiate and purchase properties using this type of financing, you’ll be setting the stage for some very lucrative profits that the average investor doesn’t even know about. Not only will you place yourself in a position to earn future profits, but you’ll also enjoy a much safer investment strategy without any personal risk. That’s because seller financing is not really a loan! Not one penny of cash money is actually disbursed from the seller to you, the buyer. It’s really an extension of credit granted by the seller to facilitate his sale!

Should something go haywire and you find yourself unable to make the payments, and you default, the seller (lender) can take his property back, but that’s all! He cannot take other assets you own to satisfy the unpaid balance or deficiency.f Most bank lenders can come after everything you own to satisfy their mortgage debt because you are personally liable until it’s paid in full.

About the lucrative profits I mentioned above! Let’s take the $100,000 sale where the seller accepted $10,000 down and agreed to carry-back or finance $90,000. I would bet within 3 or 4 years after the sale when the balance is still close to $90,000…if you were to dangle $60,000 cash in front of the sellers nose, he would take this discounted amount in a New York minute. When he does, you’ve just made 30 grand. I have done this many times over my 40+ years of investing.  Believe me… you want seller financing! Find out everything you can about it.  It will be well worth your time. 

Keep in mind you are unlikely to get seller financing for most single family homes.

Good luck.

Fixer Jay DeCima