All Forum Posts by: Mike Watson

@Marco G., I believe that there is a nice-sized recession coming before too long because increasing housing prices have far and away out-paced personal earnings for homeowners. For many years too. Additionally, the interest rate has been held down artificially low for too long as well. Something will have to give at some point. I hope I am wrong.  

@Jeff G., Seller Financing is relevant in any market where people struggle, any of us, to get financing OR banks become (or are already) difficult.  

Seller financing is so much better and easier than working with banks.  Alwasy has been too.  Even back in the "everyone is approved" wild, wild west days.  

@Account Closed, I truly believe that there is a nice-sized correction coming soon.  I am doing either short-term deals or cash flowing long-term deals.  

And seller financing has always been huge in any of the smaller or larger recessions.  Great stuff.  

@Jeff G., I couldn't agree with you more about the need for seller financing.  Many people who've done lots of deals haven't mastered or even done much seller financing.  I do it on almost every single deal.  So simple once you "get it."  

And once that happens, it just makes sense.  Thanks for your welcome to the site.  I hope to be able to contribute somehow.  I love real estate despite the difficult times in the world-wide crash.  

I've taught and trained a lot of people and this topic has always been a favorite everywhere I've gone.  

@Jeff G., Here are a few more.  We will see if a discussion gets going.  I'd love to share the info with everyone.  I'm new here and am not sure what the interest level is in significant and repeated seller finance techniques.  

7.  To avoid the recapture tax from selling a property.

8.  They don't have a suitable property, or one that they like as much, if they had to do a 1031 tax deferred exchange to replace their property and avoid taxes.  

9.  They don't believe you have enough cash to qualify for a loan. 

10. They don't believe that you will physically take care of the property, that it will fall into disrepair.  

Hope this helps Jeff!

Over many years of real estate investing, I have done many deals involving seller financing.  I have learned that seller financing is actually better for the seller than it is the buyer, for many, many reasons.  

However, if you want to be a rockstar at seller financing it is important to know all the seller objection out there and how to overcome them all.  

I won't list all 13 objections here, I doubt anyone would read the post, but I will list a few of them.  I use what I call the "5 Great Neutralizers" to overcome any objection on the list.  Great knowledge that has taken many years and deals to acquire.  

1.  Due on Sale Clause.  Most people think of this in their mind as the "Don't on Sale Clause."  The DOSC is a lot less difficult to navigate than most investors know.  Banks don't want to call the property due, they just have to feel comfortable about what is happening with the property and they will allow the wrap or subject to, to continue. 

2.  Seller wants to avoid the capital gains tax that comes with selling a property.  Keeping the property allows them to avoid capital gains tax.  However, when described correctly, most sellers that have owned their property for years will actually pay more taxes overall than they would selling and paying capital gains.  Lot of lost opportunity cost potentially too.  

3.  The seller thinks that you don't have the credit or income to get a bank loan.  

4.  The seller needs their equity to buy another property and therefore won't seller finance.  

5.  The seller needs to pay the mortgage off that you want to "wrap" to qualify for another. 

6.  The seller believes that you won't make the mortgage payment.  

Anyway, there are 7 more that I run into and overcoming them with the neutralizers that I use makes for a lot of fun deals where I don't have to deal with the bank and raise more capital.  The sellers love the deals too.  

@Tabitha J. @Michael Plante,  Nice work on your seller-financed deal Michael.  70% of the deals that I do have 50% or more seller financing involved.  Free and clear properties are great, but most of my properties are not free and clear.  

With the due on sale clause, there are ways to mitigate the issues that might come up in the future, i.e.  make the payments, keep the insurance enforced, take care of the property, only do wraps or subject to's short term while you sell or refin and use a 3rd-party escrow company for payments.  Good stuff for sure.  

Lots of deals are to be had.  When sellers learn that they can get just as good of returns as banks, not just the interest rate, many are interested.  

Sounds great.  The vast majority of the condo conversions we've done have been largely, seller financed. Keep up the good work.  

What are the units worth as as condominiums?  We have had a great deal of success on properties that don't hold their values based upon their cash flows converting those into condos.  

I'd do an extended closing with enough time to get the entitlements, HOA, CC&Rs and repairs done to the property. Close and immediately put the units back up for sale. Keep the one you want, perhaps free and clear or with a huge equity position.

What area is it in SoCal?  I've done quite a few deals there and used to live in the Inland Empire.  (Rancho Cucamonga.) 

Congrats @Ivan Barratt.  Nice work.  How do the numbers look for a condo conversion?  We've had lots of success with those in the past.  I love Indianapolis and the Fort Wayne area.  Lots of good deals.