How to Buy a Triplex with $500 Out-of-Pocket

I can't tell you how often I hear folks say, "I could never buy properties because I don't have enough money." It's that kind of limited thinking that is the real issue. I spent months in 2017 studying seller financing techniques and retraining my brain to look for opportunities to create dialogues with sellers who could understand the benefits of seller financing. At the time, I was also looking for pre-foreclosure deals, so I would cold-call sellers for 10 hours every week trying to set face to face appointments to try and solve their problems together. By chance, I accidentally called one of these seller's former bankruptcy attorneys. We hit it off over the phone and decided to grab a drink. We stayed in contact and about 6 months later, I got a text from this attorney asking me if I would do a comparative market analysis on this triplex that he had owned for many years. With only $10,000 in my bank account, and a new mindset, I immediately saw the opportunity!

We met at the triplex and I began putting to use all my training on how to explore a win-win deal for us both. He was tired of being a landlord and wanted to sell to move towards retirement. At the end of the tour, he told me he would most prefer to sell it using seller financing so I simply said "Why don't you just sell it to me?" Unless you ask the question, the answer is always no. To my delight, over the next few hours, we put together a deal.

Tell me a bank that will give you those terms! It doesn't exist. Since two of the three units were vacant, I negotiated a 45-day delay on the first payment and the ability to advertise the units for lease prior to closing. This allowed me to collect almost 2 full months of rent before my first payment was due. Also, I didn't have much money in my bank account at the time, so I called a friend to loan me $10,000 for the down payment in exchange for a second position lien at 4.5%. I knew the property would cash flow and I could pay off the second in 12 months. This is how it all turned out.

Of my $7,300 out of pocket expense, I recouped $6,790 in monthly rent prior to my first mortgage payment. Not to mention the fact the property cash flowed $500 right off the bat. A great deal for me!

You may be asking, "Why would the seller ever do this kind of deal?"

For the seller, if he had sold it on market at the same price he would have net $585,000 after capital gains taxes. Because he chose to sell to me, he will make interest on the total balance for 6 years and net $809,000 (even after capital gains). In other words, the seller is making $224,000 more by selling it this way to me! Not a bad deal for him either. By cutting out the bank, the seller and I have created a mutually beneficial agreement and put more money in both of our pockets.