All Forum Posts by: Brian Ellis

Keep this in mind though.  LO is actually a form of seller financing.  When most refer to Seller Financing, they are talking about the seller taking back a note on the property they are selling to you, or in other words, they are replacing a traditional lender (bank) for your financing.  The difference is this.  When you get a loan from the bank, you're actually buying cash from the bank, then spending it all (giving it to) on the property.  I've always laughed at the term "borrow".  You're not borrowing money...you're buying it.  If you were borrowing it, you wouldn't be charge interest, and you would return the same money to the one you borrowed it from when you were finished with it.  Kind of like a shovel.

When the seller replaces the bank, you're not buying cash,...you're buying equity,...one piece at a time.

@Brian Ellis    Thanks for the mention. Nice to be called back every now and then.

In a nutshell seller financing is selling now while a lease option is a lease that also has a separate option to buy later. Separation is key.  The tenant has a standard lease in one hand and an exclusive right to buy at a certain price for a certain amount of time in the other.  They pay for this right in the form of option consideration.  The words 'down payment' do not exist in the option world. 

For instance I just did one last year and the tenant buyer exercised her option and purchased this March.  She paid $9000 for the exclusive right or option to buy for $325000 within 12 months.  I also offered an extension of an additional 6 months for a fee of $5000 but she didn't need it. 

Consideration is like earnest money and goes towards the future purchase. I generally charge about 3%.   A fee is just for more time.  Both are forfeited if the option is not exercised within the term of the option given.

So yes, you collect rent.  It is a standard lease.  The option is separate.  I allow mine to be assignable.  I love these for my nicer houses  I don't plan on holding forever or houses that need work I don't want to do.  No commissions and no vacancy while you wait for your buyer to get a loan.  

@Brian Ellis When you exercise a lease option to purchase the property you are purchasing through normal means in the future with the buyer either paying cash or getting a mortgage. In seller financing the seller becomes the bank.

 Great suggestion! Thank you Brian! Would you or anyone happen to know how to set a criteria for a properties that have been owned for at least 5 years?

It's going to quickly cool off the housing market in different sectors. I am seeing it locally. I have multiple listings and they've gone quiet simultaneously at various price points. You'll always sell residential stuff because people need a place to live but IMO realtors (and more importantly owners) will need to adjust their pricing because people are still going to want to sell homes like it's a 3.5% rate environment when it's currently a 6% rate environment. A lot of residential owners also are unlikely to want to sell their house that they have a sub 4% rate on, to sell it and buy something else at 6%. JMO. 

What would be a good way (hopefully free) to get a list of multi-family properties in specific areas that are not for sale/looking for renters. I am trying to do direct mail on multi-family owners that are not listing their properties.