Owner Finance Marketing

17 Replies

I'm trying to expand my buy and hold portfolio via owner financed deals. Any ideas on how to market specifically towards these deals?

Not enough information. Buy and Hold is long term, seller financing is usually short term financing. :)

Good point @Bill Gulley

:)

So my thought would be to try and find a property where I could get it amortized over 20-30 years with a balloon in 5-10 years. At the time of the balloon I could either pay the property off or else refinance into a conventional loan or else sell the property and exchange into another.

Is that an unrealistic plan? I'm just starting to hit my "max" on conventional loans (currently I have 4) and I'm really wondering what my best route would be to expand on buy and holds without having to pay cash for everything.

Thanks, that makes sense.

Your loan limitation will exist later on too, unless you payoff or sell others, so to say refinance, the issue will still be there. You need to get into the commercial side of your bank.

My most successful approach was targeting older landlords. The pitch is basically "aren't you tired of fixing things, collect late rents and cleaning up units"? I went at it as a retirement plan that allowed close to what they would receive less maintenance, taxes and management. I had bulk purchases as these old timers had accumulated several properties.

Terms with a 30 year amortization are not difficult to work in as rents support such financing and the landlord understands a 20 to 30 year amortization.

The balloon is more of an issue. Then you point out alternative investments paying interest at the note rate. If they are retired, what is the requirement for a lump sum? Most will agree, they don't need it all and pay taxes on gains, one aspect most don't like especially when the acquired properties decades ago. If there is some need for more money, you can break down lump sum payments into smaller amounts. This is where you may get creative, say providing a smaller lump sum each year for five years, that might help putting a grandkid through college.

IMO, older landlords are the best target market for buying seller financed rentals. Then, you can always make the same offer to any owner. It will depend on your market and homes targeted as to what you go after.

Selling yourself to a seller is important, don't blow smoke at them but stress your ability to pay as agreed. The approach to take is to have them consider selling, find a price agreed to, then interview them as to their needs, meet the need in devising terms, set an interest rate they can't obtain elsewhere. All along ensuring your side provides the cash flow desired, justify your needs with maintenance and management, taxes and vacancies. Arrive at a payment and move into closing your offer. I'd always give a little comment, "well, that's a lot better income than working for the difference....or for fixing toilets"

I suggest you get advice on setting up the technical side, drafting the note and making sure that you're not doing crazy stuff that is not down a more conventional road. Conventional does not mean you can't be creative, but creative isn't just any nutty thing someone can dream up either. Use an attorney. :)

@Bill Gulley

This is my favorite marketing post, older landlords, find all the advantages.

I like the term annuity, a cash flow asset that can be sold and inherited.

  • stress your ability to pay as agreed.
  • to have them consider selling,
  • find a price agreed to,
  • interview them as to their needs,
  • meet the need in devising terms,
  • set an interest rate they can't obtain elsewhere.
  • YOU ---
  • provide the cash flow desired,
  • justify your needs with maintenance and management, taxes and vacancies.
  • Arrive at a payment and move into closing your offer.
  • "well, that's a lot better income than working for the difference....or for fixing toilets"

The Aggravation Factor. :)

Lastly, creating a note that can be later sold in full or a partial front end payments needs skill. See a note broker and an attorney.

Good posts. I've purchased a handful of seller financed properties.

Interesting the sellers have all been older widows.... Hmm I might be on to something.


Frank

The fastest way to build a rental portfolio using other peoples money, hands down for any small investor. I picked up 12 in one deal from one landlord, others spin of 3/4 to 8. These are individual landlords, usually they aren't full time RE types (or they were Realtors) but as you find larger operations those will generally be set up with management, might be family but they tend not to be one guy operations, they are more in the business. These bigger owners may spin off under performing properties, but beware, they know what they are doing too. Target mom and pop.

Another thing, I have seen several LLs advertising rent to own or SF to get rid of problems, so beware. These older guys operate as if it was 1975, uninformed or think in the old SF rinse and repeat mode, so ensure you up date them as to predatory lending issues and move their thinking to acceptable practices. If they don't budge, walk away!

One of my deals was with the most honest men I've ever met, he came back after the sale to help fix things saying he wanted things to be right. One older bungalow had a leak under the kitchen sink/window. I showed up and he had a couple pieces of lap siding off on the outside with insulation and replaced a nipple on an abandoned line off the supply line. Put it all back and touched up the paint and caulked the siding. Anyone else would have attacked the problem from the inside or just ran new lines. Point of this, besides saying there are honest people out there, is that these old guys know their properties like the back of their hand and if you come across a less honest type, you can get played as a newbie. So, any seller that has a pitch, a deal, terms set and tells you the place is solid......beware! I'd rather be the one to approach the owner with SF than answer any ad offering SF. That's just me, I find it easier to make the deal than to answer to their deal. :)

ok @Bill Gulley I am now ready to sell my 5 Dayton properties with seller financing, You have succeeded in hitting all of my hot buttons in one post.:)

only half sereous.

Originally posted by @Michael Lauther :
ok @Bill Gulley I am now ready to sell my 5 Dayton properties with seller financing, You have succeeded in hitting all of my hot buttons in one post.:)
only half sereous.

So long as they cash flow, a hundred bucks a door, name your price and I'll draft up the note and buy them all and guarantee you a ten year annuity on a 30 year amortization, Just let me know!

BTW, it is April first!

What's the other half of your issues? Lay them out, we'll suggest ways to achieve what you want and you can go from there. :)

Originally posted by @Bill Gulley :
The fastest way to build a rental portfolio using other peoples money, hands down for any small investor. I picked up 12 in one deal from one landlord, others spin of 3/4 to 8. These are individual landlords, usually they aren't full time RE types (or they were Realtors) but as you find larger operations those will generally be set up with management, might be family but they tend not to be one guy operations, they are more in the business. These bigger owners may spin off under performing properties, but beware, they know what they are doing too. Target mom and pop.

Another thing, I have seen several LLs advertising rent to own or SF to get rid of problems, so beware. These older guys operate as if it was 1975, uninformed or think in the old SF rinse and repeat mode, so ensure you up date them as to predatory lending issues and move their thinking to acceptable practices. If they don't budge, walk away!

One of my deals was with the most honest men I've ever met, he came back after the sale to help fix things saying he wanted things to be right. One older bungalow had a leak under the kitchen sink/window. I showed up and he had a couple pieces of lap siding off on the outside with insulation and replaced a nipple on an abandoned line off the supply line. Put it all back and touched up the paint and caulked the siding. Anyone else would have attacked the problem from the inside or just ran new lines. Point of this, besides saying there are honest people out there, is that these old guys know their properties like the back of their hand and if you come across a less honest type, you can get played as a newbie. So, any seller that has a pitch, a deal, terms set and tells you the place is solid......beware! I'd rather be the one to approach the owner with SF than answer any ad offering SF. That's just me, I find it easier to make the deal than to answer to their deal. :)


Bill just hit some very good points.

The seller financed properties I've found were not advertised as SF. They were mls listings that were a little over priced and had been sitting on the marketing for several months. These sellers had owned the properties for 20+ years and some were involved with the building/development of the properties... so some emotional attachment was involved. Older investors don't want to give away there properties and they don't want someone to present them a complicated spreadsheet on how you want to buy the property. A simple half page offer letter is all it takes...


True, don't dazzle them, just show the money and the benefits, meet the needs and overcome objections. They don't care about spread sheets or any pro forma, they aren't concerned about you so much unless it effects them.

Brian, yes, absolutely, my best pointer is don't get notes off the internet!

Notes and mortgages/deeds of trust are not nationalized, they can be specific to local areas, depending on the contract. Often a RE attorney or title/escrow agent can assist in using a note customary in the area. If you need special terms, write out what you want and give it to an attorney (or might let me see it, LOL). :)

The deals I have done the notes were generated by the escrow company. There is nothing we the buyer really have to do, atleast in CA, besides presenting our terms and signing a contract.

Originally posted by @Frank Romine :
The deals I have done the notes were generated by the escrow company. There is nothing we the buyer really have to do, atleast in CA, besides presenting our terms and signing a contract.

That's the way it's been commonly done for decades everywhere. Investors should not be drafting notes and security instruments or installment contracts unless they have had formal legal training, finance and compliance training. Really, they are betting their money that their documents will pass the tests of different fires they probably have no knowledge of. Just not a good idea. :)

@Troy Stoehr Everyone here has given you a bunch of great ideas for owner financing deals. Use the strategies and keep asking, some will say "Yes!". (I keep asking, and some do!) You mad an assumption the others did not point out. You said you were hitting your "Max". There is no "Max", people just think there is. My rule is to ALWAYS ask for owner financing first.

That said, I'm also a commercial loan officer. I'm seeing people get financing that have up to 80 residential properties with mortgages. (Most with banks, some not).

You need to step into commercial lending, with a lender who will finance residential properties. However, expect to need 20-25% down or equity to go the commercial route.

There is no "Max" in the commercial world of lending.

Awesome - thank you all for your input on this. Bigger Pockets is so awesome. Also, @Darrin Carey , I appreciate your input. I haven't really thought about commercial lending at this point (yes I'm a "noob") so thanks for bringing that up. Now I just need to go for it.

Thanks!

I need to learn more about owner financing. I have a property in SF, a duplex, I'd like to sell. It's a good property, always rented. Maybe we can work something out.


Welcome to BP, Rhyetta. need to introduce yourself in the forum and take care to read the rules, we don't solicit in the forums specifically. Other than suggesting working something out you're fine.

I agree with Darrin, you need to get with the banks. I suggest you form banking relationships with two or three banks. There will be times that a bank won't always be as aggressive in lending, they can pull back a bit for various reasons. Banks do have limits, not as to the number of loans so much as to loan concentrations to one borrower, the higher you go the greater risk you present so spread it around! :)

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