My thoughts on seller financing

[Samuel Maddox]

All right people, I was asked by someone if seller financing is a good thing when dealing with Multi-family units and have I done any. Well, of course I have, and yes it is a great thing! When your starting off investing in multi-family real estate, its not easy to get the capital you need to get in the game. Everyone is going to keep say "you need some skin in the game". I was so tried of hearing that crap. If someone like a hard lender tells you that, either they don't have the funding to give you, or its at the top of there lending capabilities. If you find a great deal, do the numbers and your NOI can support the principal hard lender loan and an interest only payment to a seller for carrying a 2nd, and make a profit for you, well my friend you are golden. The mistake most people do when they try to do seller financing is not doing the basic math. If the NOI can't support your payments and give you a profit, that means its not the property for this type of financing. The cash flow has to be there in order to be creative in buying and being successful on these type of deals.

Also, If the lender is more concerned about your credit and you then the great deal in front of him, then they are definitely not the lender you want.  That's what hard lending is suppose to be about. Not having to give your right arm or one of your kids and dog away for money like the banks want.  The deal is the deal, not you. Of course you have to be responsible, trust worthy and a little smart, but a hard lender should recognize a great deal or a bad deal when they see one.  Some of these guys are acting like banks, asking for 800 credit scores and want to know your net worth!!  What! If my net worth was large then I wouldn't need them to borrow money!  Are you kidding me.  Look, when you can do seller financing on any level and not have to put a lot of your money on a great deal, every body wins.  The lender makes good money off the Interest they charge, the sellers get to sell their property and make some extra cash off the Interest for carrying, you get to buy a multi-family property which you can refinance and pay the lenders and seller off and get a conventional low payment.  If the deal is really good, you can do a cash out refi and pocket so good money as well for your next investment. 

So don't be scared or intimidated to ask about seller financing. If done right, its a win win for everyone.  For me, I will give a seller is asking price and pay him interest for carrying if it meant i can get a nice cash flowing multi-family unit.  So if you don't have the means or daddy's money, get brave, creative and most importantly..  ACT!  Don't let someone tell you you can't do something when you clearly know you can...  Have a good day and happy multi-family hunting!