How to start marketing for seller financed properties

Question

Hi guys,

I am looking to get started in real estate investing and I am very intrigued with seller financing. I am wondering if you can provide me with some information on how to find seller financing opportunities. Everything I have researched, listened to, and watched has taught me how to scale into getting bigger but, not how to get started. All of the information I have learned is tailored to big businesses with a lot of capital and resources to purchase many properties at once. For a new investor with limited capital what is the most effective way to find opportunities? Should I start with direct mailing and pulling lists from websites like Listsource or should I cold call and door knock? Any help would be greatly appreciated! Thanks

Jonathan Greene · Answer

Most people who ask this do it because they want to get into investing, but don't have any money to invest. This is not a viable option as your only way in for almost all people who try it. You have to understand what you are offering and why. Your list building would start with 100% equity, no loans, and in disrepair visually, which you can't get from a list. Your postcard should float the idea, if you've listened to Pace Morby's recent podcast, that you will pay more than wholesalers and investors in the area, but to find out why and how, you need a call back and then you have to have your pitch down.

Cornelius Garland · Answer

@Eddie Pietschmann I would market for creative financing properties the same way I would market to get wholesaling deals. You can actually be looser with your criteria in your list pull since you don't need a ton of equity to make these work.

I would definitely pull a list. No need to go to your county. I would get a Propstream account, pull your list, skip trace it, load it up in a dialer and you'll be on your way. You can also text your list as well. Just realize you'll need to focus on volume. A list of 500 sellers won't cut it. You can expect about .2% of your overall list to have motivation. Meaning, if you have a list of 10k sellers, if you market to it consistently over a month, you can expect to get 20 people that want to sell within the next 30-60 days. Everybody else will say they're not interested and not motivated. As you start speaking with sellers and calling them, please don't get discouraged that the majority of people will be cold and not interested. It's just a numbers game.

Also, creative financing can be very tricky. I actually haven't put one of these deals together yet but I've learned a lot about it over the years. I worked with JV partners that put the deals together and I would help them out with marketing. A lot goes into getting these to the closing table. I would definitely consider partnering up with someone on your first couple of deals. Check out Joe Bodek. He has a super affordable program and actually will hop on the call with sellers for you to explain the creative financing process. I think he splits the option deposit with you 50/50 on lease option deals. But to join the program, I think it's like $99. I hope this helps.

Tom S. · Answer

@Eddie Pietschmann  I've purchased a number of seller financed deals over the years and most of them were found on Craigslist or other on-line marketplaces.  Search on seller / owner financing / handyman special, words like that.

Doing it for over 15 years, a few pointers:

- Seller financed deals are slim when the market is hot, like now.

- Most deals need work put into them,  The property might not qualify for conventional financing, which is why it's being offered as seller financing.  Be prepared to put additional money into the project.  Be aware of sellers that are just trying to unload crappy properties on a newbie.  Full of non-paying tenants and things like that.- Any good seller will require some down payment.  Don't' expect 100% financing.  The lowest I got was in the 5-10% down range.  Plus closing costs.

- Be sure to get it appraised so you're not overpaying.  The seller won't require it like a bank would.

Good luck!

Patrick Drury · Answer

@Eddie Pietschmann

The only way to find seller-financed deals is off-market not going to find those on Zillow or the MLS. The best way to get off-market deals is cold calling. Everybody has their own opinions from cold calling to direct mail, and door knocking, but cold calling is the king of finding off-market deals.

Will Barnard · Answer

Seller financed deals is NOT the best way to find 100% financed deals. The use of private money, hard money, lines of credit, etc (or a combo of any of them) is the best way to get 100% financing. That said, you are overleveraging and placing the second lender at more risk, so expect to pay higher rates on your second. Plus, with no experience, getting 100% financing from hard money lenders will be next to impossible without combining a private money second.

If you don't know the difference between hard money and private money lenders, then you also have more work to do. Be careful as many hard money lenders like to call themselves "private money" but they are not and there is a huge difference between the two. These are NOT terms that can be mixed.

Eddie Pietschmann · Answer

Thanks for the reply @Patrick Drury If I was start cold calling people, should I start with obtaining a list from the county clerks office? Or do you think their is a more effective method?

Tom S. · Answer

@Eddie Pietschmann  Ideally put the appraisal into the contract that both parties would then sign. Even if not in the contract, you can always get an appraisal during the due diligence phase of escrow.  You just won't have as much leverage if it comes back not as expected.

Eddie Pietschmann · Answer

@Tom S. Thanks for the pointers and letting me know to be careful of people trying to offload bad properties. Seems like that could easily happen if I am not careful. Thanks for the appraisal tip as well. Is that something I want to put in the purchasing contract as a condition or when is the best time to get that appraisal done?

Eddie Pietschmann · Answer

@Cornelius Garland Thanks for the reply. I've been looking around and like what Propstream has to offer so I think I might roll with that. I appreciate the information on where my expectations should be as well.

Eddie Pietschmann · Answer

@Patrick Drury Thank you for the information. I'll check it out.