In order to make real estate investing your career there are a few components to success: Real Estate knowledge, a good team around you, a good deal in front of you, and adequate capital to fulfill your exit strategy. The money part of the deal tends to hold most people back from pulling the trigger and starting their investment career, yet there is a powerful force that can be used to give you the capital you need to be successful investing in real estate: Seller Financing.
Over the last six months we have talked about many aspects of seller financing, but one thing we have not covered is how to use seller financing for a traditional fix and flip real estate transaction. In this scenario the seller agrees to finance your purchase, which allows for the “where is the money?” question to no longer be an issue. With the financing in hand, you can focus on the other aspects of making the deal successful, such as what improvements to make, how to market the property, and how to close the sale. So what does seller financing a traditional deal look like, let’s take a look at a recent example I did to see how it can work for you.
Following up on a lead I tracked down by calling on a “We Will Finance You” sign, the investor had a property he was willing to sell, but only for a price I couldn’t pay cash for. Instead of passing up on the opportunity I offered to purchase his property close to his price if he would offer me short term financing. After negotiation we agreed upon terms which included zero money down, and no payments for 12 months. The deal was closed at a title company and the land contract was recorded with the county. These terms allowed me the time I needed to properly rehab the property and get it ready for the traditional retail market.
In the end I was able to apply my capital towards the rehab and afforded me the opportunity to offer my salesperson a higher commission to move the property in a timely fashion. As of today the property is pending after being on the market for a mere 17 days. When we close on the property the seller who offered me financing will receive close to their asking price, I will make a profit on a true “zero-down” deal, and the homeowner moving in has a property that was properly rehabbed. Not to mention the property is a great improvement to the neighborhood. Seller financing has created a true win-win-win scenario.
Have you used seller financing for one of your deals? I would love to hear your story, and as always your comments and feedback are appreciated.
Photo: Land of Nod Studios