​My First Seller Financed Rental Property

I think we are all on Bigger Pockets for the same reason. We want to become financially free. Some of us have 0 experience while there are some really big dogs in the game offering advice and mentorship. I am only 6 months in to this journey so I am just hoping to inspire and encourage new investors as I develop by blogging about all of my deals along the way. My previous posts talk about my successes in wholesaling but today I want to share about my very first rental property done with creative financing that closed December 15, 2017.

How I Found The ‘Deal’

While wholesaling, I come across all kinds of properties and seller situations. In the beginning I only focused on leads that came in with, pardon my French, Shitty houses. These were my bread and butter and what I started learning how to do on Brent Daniels Team. However, I noticed that I was ‘deading’ (disregarding) so many sellers that wanted to get out of their properties. Now, I remember in a book called thou shall prosper that the amount of $$ you make correlates directly with how much value you provide. So I thought to myself, how can I provide value to any seller that I talk with?

Answer: I need to be a problem solver!

I have had people ask me how to refinance their properties, go through a short sale, sellers who don’t have shitty houses and want retail prices, Landlords who want to keep their passive income but who are tired of dealing with tenants and much more….Because of this I started searching and finding solutions for each of these scenarios so that I can be the person to help!

So one day I get a call from a mail lead that I sent out. The lady was older and she had a condo that she wanted to sell. Condos here in Arizona don’t have much margins for wholesaling so I typically offer 3 different solutions.

The first solution I provide to sellers is to buy the property cash, a quick close, no realtor fees, closing costs, inspections or appraisals and offer about 60% of market price. Only if the condo is really trashed do I offer this solution.

The second solution I offer is that I help them sell their property on the market to traditional buyers. This process is going to take up to 90 days, we might have to do minor repairs to the property, get photos, put it on the market, show the house, go through negotiations, appraisals, inspections, and lengthy paper work.

The third solution, and this is where I get to my deal, is if the seller owns the property outright then I will ask if the seller wants to seller finance the property. I am able to offer more than my wholesale price, structure the deal where she still gets passive income, she gets to spread out her tax liability, and ends up making a lot more money over time than if she were to sell the property outright today.

It’s all about creating WIN-WINS!

Breakdown Of The Deal!

Retail Price: $79,000
What I bought it for: $65,000
Down payment: $8,000
Interest Rate: %5.5
Amortized: Over 30 years
No Balloon payment
Rent: $950/mo
-P&I: $342/mo
-Taxes & Insurances: $40.70
- HOA: $250/mo
=317.3/mo x12=3807.6 profit a year

What’s our Cash on Cash Return?
Initial Investment:
8,389.4 after closing costs
983.89 renovation costs
= 9,373.29 all in/3807.6
=40.6% COC

The cool part is, I can’t apply for a conventional loan because I travelled the last three years of my life in Asia and wasn’t required to pay taxes. Because I didn’t pay taxes I can’t qualify for a loan but I had the money for this deal. So it’s a win-win all around like I said earlier!

The next two posts are about How I started raising capital for real estate deals, and how I fell in Love with Arizona’s “Mobile Home Guy”/how to get 15% annual returns lending money on Mobile home deals!