The Time to Accumulate Assets is Now…Wealth is within your Grasp!

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This is not a big secret, but I wonder why more people are not jumping at the opportunity to build their balance sheet with assets on contract terms? Here´s a recent transaction I personally did: I found a private seller in Indianapolis, IN who was looking to unload four of his rental properties. He was asking $40,000 cash for each property. They were being sold with performing tenants and management in place. They were netting over $600 each after taxes and expenses. The investment would provide an 18% net return on my $160,000 cash outlay. It was a good deal but I knew I might find better….it was nothing to jump at…..Yet! Here is where it gets exciting! I knew the properties were in a stable area, and there were city improvements planned around there, so I decided to review the deal a little further. As it turns out, the seller was looking to sell the four properties to pay off 4 underlying mortgages of $40,000 for each property. The seller was not looking to make any money; he was just sick of being an out of state investor and wanted to focus on other things in life!!! Better yet, the seller had secured financing on each property for around 4%, an incredible interest rate for anyone!

Sirens started going off in my head. What if I bought these properties on land contract using the existing underlying financing? It was worth a shot! I approached the seller and offered $1,000 for each property, and contract terms that mirrored the financing he already had in place. He happily accepted the terms and I was able to save my $160,000 of buying power for another deal. Better yet, even with the financing in place, after I make the contract payments to the seller, I still net around $1,200 a month on the deal! Not a bad return for having the foresight to offer to purchase on seller financing terms.

Here are a few quick tips to consider when evaluating a real estate deal that you may want to purchase on terms.

Always Ask: It never hurts to ask from the get go if they offer financing terms. I tend to ask the price of a property and then ask if the property can be bought on terms for that price.

Find out their Motivation: Just as our above example illustrates, you could very well buy the property you are interested in for cash, but if you learn more about their motivation for selling, you could gain some valuable insight that could open the door to buying on seller financing.

Let the name price and interest rate first: I would have been happy paying a higher interest rate in my example, but the seller made an assumption that the going interest rate was 4%. Letting him name the price enabled me to accept or negotiate better terms. I have been involved in many transactions where the seller has assumed they will be paid in monthly principle payments with no interest. It is always to your benefit to let the seller lead the negotiation process.

These are but a few quick tips to remember when buying a property on seller financing terms. Make seller financing your best friend as you accumulate assets and build wealth in 2011 and beyond!

Have a great seller financing story? I would love to hear about it….share it below!!

Photo Courtesy: Michael Pereckas

About Author

Kevin Kaczmarek is President of Capital Blueprints, LLC. Serving a national and international client base, Kevin helps clients achieve their personal goals for long-term stability and solid financial growth through Self Directed IRA Investments and individualized Passive Income Strategies.


  1. What do you mean; “I approached the seller and offered $1,000 for each property, and contract terms that mirrored the financing he already had in place”?

    The seller sold you the properties for $1000 each or you got a purchase option contract? What are the terms after the $1000 down?

  2. Kevin,

    Great story and great deal – to walk away with $1200/mo. plus future equity with little/no out of pocket money is amazing! How did you find this seller? Were you mailing out of state owners or did they find you some how?

    • Thanks Jon. I appreciate it my friend
      @ Mario, I emailed you directly so I can answer your questions better
      @Bob, essentially I took over his 30 year financing with that great interest rate and performing tenants. Could have been a basic “Subject-To” deal but we both liked the contract idea
      @Anon, thanks! The seller was found with direct mail letters. The article motivated me to send a new batch of 50 out to see what happens. Patience and repetition.

  3. Great post, great result.

    Here is my financing story that I am currently working on. Seller wants to net 23K on his property. Recently I have purchase 2 properties to flip in the same neighborhood that are 50% larger on a better street, have an extra bath and for only 2K more. I sighted my concerns and told him we are a bit far apart as I believe the property is only worth about 15K with the hopes of meeting in the middle at 19K. He declined but in the back of my mind I have always had the idea to offer him his 23K if he will seller finance the deal. With only 20K in rehab we are left with a 10-15K profit. That would be a 50-75% cash on cash return and in 6 months or less. Much better then putting in all 45K and get a 20-33% return in 6 months or less. If he goes for it I think this will be a very good deal. Not a huge one profit but a huge margin. The best part is that the property rents for roughly 850 on only 45K in which really mitigates risk.

    Any thoughts on my idea? Any recommendations on approaching the seller after he has said No?

  4. Kevin,

    I love the insight about getting to know the motivation and you’re absolutely spot on about how it never hurts to ask about seller financing.

    I’ve been structuring a lot of deals this way to save cash flow, and here are a couple of key phrases I’ve learned along the way to back up what you’re approaching.

    If making the payment offer, I always use the phenomenally simple yet so underrated little phrase “until paid”, implying I’m paying the seller $xxx dollars until paid without any interest! You’re example of 4% is a steal, and clearly the seller had some previous experience with financing…most folks are happy with the $xxx “until paid”.

    I find it also helps to address the “seller financing” in the terms of offering an annuity payment. To the right seller in the right situation, just terming the phrase and then explaining that you’ll send them a monthly payment “like an annuity” seems to bring some added “security” on their end, especially to the older or retired folks!

    Thank you for the case study, keep up the good work! More investors should explore the idea of seller financing to purchase.

  5. Great article,
    I was curious though how did you evaluate the properties since they were out of state? What difficulties have you run into managing out of state properties? So essentially , you paid $4000. to take over 4 mortgages totalling 160,000. at 4%interest? Thats Great! What do you use as criteria when sending out direct mail letters?

  6. Kevin, I gotta say, awesome blog. I’m not at the stage of buying and selling properties yet, but I’m hoping that soon I’ll be in the financial position which allows me to invest in houses.

    Great Blog!

  7. Kevin, Great post, thanks so much! On the seller financing, where can I get the templates or shall I tell the escrow company to write the legal documents (notes) with my terms and conditions? I have always been fixing and selling. When it comes to notes, I am new.

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