All Forum Posts by: Benjamin Aaker

Hi James,

With seller financing, the seller is acting like the bank. The first step is to talk to an attorney because you will likely use them to draw up the contract (at your expense). If the attorney isn't doing any negotiating for you, budget $1,000 for your first one.

The next step is to find a seller and talk with them directly, if you can. Going through an agent is OK but adds another layer of complexity. Only use an agent with experience in this area.

You'll next have to explain to the seller why their financing is a good thing for both of you. You'll need to be extremely knowledgeable on the subject before attempting. Check out Creative Cash by Bill Ham.

The seller then will then give you possession of the property for your promise to pay them in x monthly payments of y dollars or whatever you agree. In some cases, the seller also could finance your down payment and you use the bank for the rest. You'll have to have a good relationship with your bank to do this.

There's a lot more detail to this, like what happens if you miss a payment and how/when the seller can take back the property. Talk with the attorney. This post certainly won't make you an expert, but I hope it helps.

Hi David,

Sorry I'm not in your area, but I do have some advice. I highly recommend multifamily right now. If you aren't going to live in the property, you'll be looking for a commercial loan, and you don't have to worry about staying below 5 units. An 8 plex is a great way to start out, even if you want to self-manage.

I recommend getting a HELOC on one or both houses. This gives you a source of funds that you can tap at any time and only requires a low yearly fee to keep active.

You should look for some smaller communities within an hour's drive to the metro that are also an hour or less from your primary residence. I don't know your market, but smaller communities are often overlooked by the big guys and there is still value to be found there. Best of luck!

Hi Seth,

You have a very nice aunt. Family is great, but it can be a problem if things go south. Are you looking to do an agreement because of this possibility? Then you really need to get an attorney. Something like this shouldn't cost much. Splitting equity unevenly means you'll need some kind of legal entity to own the property - also would be good to have an attorney. 

You should consider getting the new rental into an LLC for some liability protections. Find a good property manager in Arizona. You'll need to contact your insurer, as the premium will increase significantly for a rental property. Taxes in some areas increase if not owner-occupied; contact your municipality.

Value-adds are a great way to increase the value of your property. Be careful in doing the rehab work yourself. This will slow you down and shouldn't be your primary job. That's finding and making deals. 

One thing you didn't mention is to get your real estate license and start selling!

You didn't say what your cash is for. If you are financially stable, put that cash to work for you first! I'm a huge fan of the HELOC, but your cash is one step better, in that it won't have an interest rate. I agree with the other commenters, that using leverage is a great idea, just use the cash for the down payment.

I'm happy you have that HELOC. It gives you money ready to go for the purchase when you need it. I'd focus on whatever of your two deals is ready to be taken down. That's the benefit of the HELOC. It gives you money right now.

The property is renting for ~$1500 a month right now. With the 50% expense ratio, you net $750 a month which gives you a 0.75% rule for your rental. This doesn't take into account the storage units, which have little expenses. Without all the info, it seems like a good deal, no need to freak out. I would recommend raising the rents slowly and developing a plan for rehab that gradually makes the changes.

As @Nick B.says, Seller financing is one way to do this. You may be able to assume a mortgage that exists. It's more likely to be able to assume in the commercial field than residential. Another option is to find a partner to help with the down payment.