ALWAYS CONTEMPLATE THE WORST CASE SCENARIO

This question here is based on; Can I get seller financing from a friend of a friend who's going to sell me the home, I think i can rent it and cash flow it. So the answer to that first is, once again you're headed on a market that's going to fall or correct back so it better be a great deal. Secondly in this type of market it's best to get the owner to carry. So you mentioned order financing, if you can come in and get that owner to finance the majority of that deal or take it subject to. That's the best way to go with very little cash, in that way if the market corrects you're not in a bad position.

I had a friend who was buying a home at the height of the market and he couldn't get financing, so he went to do an owner's carry because they advertised owner carry. And so in there that's the direction I told him, was to get the owner to carry as close to 100 as you can with very little cash down. Remember that the owner puts the risk on the owner if a market collapses. So if you put very little down and the owner carries it for you, then if the market collapses and things go bad, you could walk away from that home. In the worst case scenario handing back the deed and your risk of loss would be low. The other benefit is if you have an owner carrying, you most likely won't get reported on your credit. So you always look at your worst case scenario not your best. So when you're going into a deal, like the other day, I had this same friend. I sat down and asked him to tell me why you want to buy this house at the height of the market.

Buying a home that's unique in an area that will probably never resell again for any great amount of money, and you can see it's hard to finance and you want to do an owner's carry. And so I asked him those questions and his response was basically a lot of emotional connection, through different things that they thought would make this property work. So we're going to airbnb. If we're going to do this we're going to have these events, we're going to have a gala and we can live in the garage while the main house is rented. All of these stories that they had built put them in a position to believe that this project was going to be successful. So it's that dream home and here's all the reasons why it makes sense when you're making a business decision, you can look at those things and that's nice and it's what you should do. You can even extrapolate that you can come to me and say, listen here's all the spreadsheets this is why this deal makes sense.

And that's a good way to look at it, a business venture. But what you must do is, contemplate your worst case scenario if the market corrects back. If that asset falls from where it's worth six hundred thousand down to three hundred thousand, believe me, no one will believe that can happen. But I've seen it, so it'll go from six to three. You lose your job, the market that you thought would happen isn't there, your wife's health fails & your health fails, there's all of these things that you need to look at. So when you go into a deal in this particular case my friend's best advice is to show him the downside. So that when he goes into this deal, his wife understands the worst case scenarios. Now they may still choose to do it, that's up to them. At the end of the day what you have to do from a business perspective is look at your downside, don't focus on the upside, focus on the downside.