Questions About Seller Financing

[Ben Morand]

Hey guys! My name is Ben Morand and I am a 20 year old college student interested in buy & hold investing. Right now, I am just trying to gain as much knowledge as I can and build connections, as I am so eager to get started in the real estate investing world.

So currently, I am trying to learn the various ways to creatively finance my first deal. I am looking to do this because as a college student, I lack steady income and cash on hand, so it doesn't seem very likely that I'd be eligible to qualify for a conventional loan. While I've looked into hard money and FHA 203k loans, another option that I've considered is seller financing.

I’ve read Brandon Turner’s Book on Investing With No (and Low) Money Down, so I have a general understanding of several creative financing solutions. However, I still have several questions about seller financing, so if anyone would be willing to give some insight, I’d greatly appreciate it!

1) How common is it to find a seller that is willing to do seller financing? I know this is a bit of an ambiguous question, but I basically am wondering if it happens often (because from what I know about it, it seems like an amazing opportunity for both the buyer and the seller).

2) Is it hard to obtain without steady income? For my situation in particular, I do not have the steady income required to take on a conventional loan, so being able to work with seller financing instead would be ideal. I also am wondering because as far as I know, the seller’s property is used as collateral so if the buyer is unable to fulfill the loan, the seller gets the property back anyways. Is this generally how it works?

3) Going off of my last question, because the property is used as collateral and the seller gets it back if the buyer is unable to fulfill their side of the loan, is it common to see 0% down? Or do sellers usually still require a down payment? (sorry if this sounds a bit simple, I am just trying to understand the potential scenarios that can come out of such a deal)

4) What are interest rates typically like for seller financing? I’m assuming they are higher than a 30 year fixed rate, but how do they generally compare? Also, are the terms usually long spread (20-30 years) or shorter spread (1-5 years)?

5) Where do people usually search for properties that would be more open to seller financing? I know for this to work well, the seller needs to have a hefty amount of equity in the property, but most property owners do not, so I am just wondering if there is a way to know this before contacting the owner (or owner’s agent)?

Thank you in advance to anyone willing to give insight! I really really appreciate it. As a new and aspiring investor, I am so eager to put myself out there and take action towards my first deal.

I am open to any and all comments and would love to connect with others for the future if you’d like!

Thanks everyone!