All Forum Posts by: Samuel Abebe

 @Jake this was the case for me specifically for the deal I mentioned... but certainly not every Seller finance deal will be the same. 30k is astronomical for a "turn-key property", and would not be suitable for Seller finance terms anyways. You 100% have to do your due diligence when structuring these type of deals. A home inspection is mandatory, if you are below $10K in repairs/improvements that would be ideal. I would say for my investment criteria anything more than $15K in turn-key rehab (in addition to my Entry Fee) is a no-go for Seller Finance.  

When sifting through these deals, or structuring your own... you want to target properties that are in rentable, move-in condition already. Preferably a landlord that is ready to relist his house back for rent, or an expired listing on the MLS for a property in nice condition - but didn't sell because of the list price. You will be surprised at how nice these homes are generally, but you do have to account for some level of rehab.

 Nothing is too hard, unless you make it! If you have FB, join a group called Creative Real Estate with Pace Morby, and MANY others like that. They have plenty active Seller finance deals right there, if you want. Obviously since these deals are already "Front-runned" or have a finders fee or "assignment" tacked on you will pay an extra premium because they're pretty much ready to assign. You could always just go out and find your own deals, if you know what to say and how to talk to sellers and keep the same deals yourself, and pay significantly less by avoiding assignment fees, etc. There are rewards and riches for creativity in life!

 Hey Chris, yes there are principal only (0%) Seller-finance terms too... it's all about how you negotiate with the seller. Also, the other point is sellers will NEVER offer terms, unless YOU are versed in structuring those deals, and what the benefits are for them (and you)! That's the key to unlock the doors of creative finance in general. Most sellers/homeowners only know 1 way to buy & sell, you the investor should have multiple acquisition tools in your tool belt that fit your investment style.

Okay bud, if you have a vacant rental in decent condition worth $300,000. You're telling me you are willing to sell it to a wholesaler for "low ball offer" which these days is 60-70 cents on the dollar vs taking a Premium on a sub 3 note? Did you fail math? Go right ahead... burn your money, others have more common sense! 

Hmm I'll sell my $300,000 home for $210,000 vs getting $337,000 doing seller finance! Smart money move.

Michael, to answer you next point: The seller owns the house out-right, so they are not "pocketing" anything... that's their money. They own the house, they are the bank to the end buyer. And yes, the payments are usually handled via a loan servicing company for a minimal fee to the seller.  And Yes, the seller has the same powers as the bank (to foreclose) on the buyer if they miss their payments... again all this is standard stuff that's written into the purchase sale agreement & promissory note with the seller. 

In the case where the Seller still had an outstanding mortgage, this would NOT be called traditional "Seller-Financed" (rather Subject-to) and has way different contracts and definite risks involved, such as you mentioned.. and others like the due on sale clause which accelerates the full mortgage due if the original lender finds out the house was sold to another end buyer without them getting their mortgage paid off first. 

In Regards to the AFR, yes you are right there will be an IRS tax implication if the rate is below the AFR rate (which for non-federally subsidizes housing is 3.75%, I think) That's a nominal risk, and is offset by the income/cash-flow from the property. But yes, those greedy bastards can't help themselves to other peoples business can they? But in my experience most sellers don't know about the AFR rules, and are willing to accept the Buyers terms as long as they ultimately get a price (value) on the property they want.

That's the point of this strategy, its about finding WIN-WIN solutions for everyone involved.

Michael, the promissory note has a clause that if the appraised value falls below the purchase price the balloon an can be extended XX months. This is standard for most balloon finance prom notes. BTW housing prices fall inter-year, not on a 5-year span. No homes bought 5 years ago lose original value by year 5! I haven't seen that in Metro Atlanta Markets... or any major metro area. Even a distressed dump of a house located in a warzones in the worst inner-cities don't lose value over 5+ year horizons. Moot points. 

Finding the deals requires some savvy marketing, and sourcing methods. That's the secret sauce!

Greetings,

Many mom & pop Buy and Hold or BRRRR investors often overlook creative ways of acquiring property. Creative means terms vs paying cash! For Buy and Hold strategies, this method is far more superior than traditional financing of properties. I am able to get these type of deals quite easily, and in fact have some available now! Let me give you an example of how these deals are structured:

Seller wants to sell their property, but for various reasons (including cap gains taxes, low ball offers from cash buyers) they prefer to seller-finance their property instead. You step in and offer them a creative finance solution that looks like this: (these are real numbers btw):

Seller asking: $275,000 for 3/2 Single family split level, 1400 Sqft, with bonus room in basement

Your Seller Finance terms as follows:

Down payment: $20,000 cash
Seller carry back financing amount: $255,000
Terms: 5 or 7 year note with balloon @ 2.75% (or any negotiated terms here)
Principal & interest: $867.61 per month (wow!) 
Buyer pays closing costs & loan doc fees: $3,800 approx.
Total Entry Fee: $23,800 to close -- or 9% of the purchase price! <------ Wow!
Turn key rehab: $8K (cosmetic stuff - carpet, paint, appliances, new fixtures and landscaping)

Cash-flow property for 5 or 7 years:
Rent rates in this neighborhood are $1,800+, or $2,200 for mid-term, and $2,600 Co-living

Exit strategy: Due to the 5 or 7 year appreciation cycle, your property is now worth $400K+ *calculators can do this now!
Refi in year 5 to pay off balloon and keep the property longer; Or Sell it outright pay-off balloon and walk away with massive chunk of equity ($140K+)

Return on Investment: Assuming you were cash flow positive for 5 years (99% certain), you turned your $23,800 investment into $140K equity position by year 5. That's a 488% ROI in 5 years, or 42.53% annual cash-on-cash return.

Contact me if you're interested in finding deals like this easily. I literally have this very deal right now...

Thanks,

Samuel A.
FairCap Investors

Hello Folks!

I have an Off-market, Buy & Hold SFR rental property, you can BUY with Investor Friendly Seller-Financed Terms = high cash flow potential see below:

About the Property: 
This delightful Split-level home offers 3 bedrooms, 2 full baths, and an extra bonus room in the basement, 1360 square feet. The home has been well maintained, and has been recently updated (interior), fresh paint and stylish new floors, brick fireplace in living room, two-car garage, fenced in wooded backyard, spacious front lot. In quiet and safe Douglasville neighborhood. Needs lite cosmetic rehab <$8-10K cosmetic improvements to get the home "turn-key rent ready" (new kitchen appliances, fixtures, maintenance repairs). HVAC, ROOF, Electrical, Plumbing, and Foundation are all Good Condition. No HOA, No rent restrictions!

Rent Rates in this neighborhood are $1,800+, Mid-term $2,200, Co-living (Pad-Split, etc.) $2,800+, Section 8?

Location Info: 13 min to I-20, 15 min to Silver Comet Trail, 13 min to Hiram, 17 min to WellStar Hospital, 20 min to Dallas, 18 min to Powder Springs, 27 min to Six Flags over Georgia (Plenty of shops and groceries nearby)

Seller Finance Terms:

Asking Price: $275,000 (below market value - comps are $285,000 and up)
Down Payment: $20,000 *due at closing
Financed Portion: $255,000 - 5-year term with balloon payment @ 2.75% (amortized 40 yrs!), with NO prepayment penalties!
Principal & Interest: $876.51 | Property Taxes: $261.67 |Insurance: $80.00 (PITI = $1,218.18)
Assignment fee: $14,500 *due at closing
Closing Costs: $3,500 *buyer pays
EMD: $3,500 *due at signing (applied toward assignment fee)
Closing Date: On or before May 17, 202, handled through Title company.

Your Total Entry Fee to Buy the property is only $38K! Or 13.5% of the purchase price!!

Don't Forget about future appreciation & tax depreciation of property!!

Please do not contact me if you are trying to wholesale or JV.

Only qualified Buy & Hold investors/Landlords please! If you are a licensed real estate agent, and have a qualified buyer DM me for info.

Video Tour of the property here. -- Google Drive link