All Forum Posts by: Jeff Stephens

I appreciate your response, again. I recognize that you are top-notch in your area of expertise. Even though we all use the term “real estate investing,” in my experience there are actually a thousand different things under that umbrella—different strategies, markets, goals, product types etc. I think that can cause confusion because it leads people to believe we are all talking about the same thing, when we really aren’t. 

Consider that perhaps you and I are not debating the validity of different strategies for playing the same game, but rather that we may be playing entirely different games. My unique (weird?) game is buying a few high-quality rental properties each year, with seller financing, off-market using a very relationship-oriented approach, and having no competition from other buyers. I respect that is likely not the game you may be playing. But I do trust there are others who want to play a similar game as I play. 

Thank you for your enthusiastic response. Speaking for myself, with my own acquisition and investment strategy, what’s most important to me is the TYPE of leads I generate, not the quantity or motivation level. I know the type of conversations I want to have—and that’s unique to me. If someone emailed me a list of 10 leads generated via SEO, I wouldn’t even look at them—not because there’s anything inherently wrong with them, they’re just not the type of folks I want to talk to. 

Hey Caito!  I'll give you my take on this...with a slight reframe.

In my opinion, I'd reframe the question from "what does it take to be successful," to “what strategy will generate leads with the Negotiation Dynamic I want to have?”

What is a Negotiation Dynamic? The Negotiation Dynamic is the context of the conversation you are about to have with the Seller. The Negotiation Dynamic is like a stage, where the performance (your negotiation with the Seller) is about to play out.

And that stage is set by your lead generation strategy. In other words, HOW you generate a lead has a huge impact on the Negotiation Dynamic you will walk into.

Let me give you 3 simple, relatable scenarios as an example:

#1: A Seller submits their information on your “we buy houses” website.

What’s the Negotiation Dynamic? Because the Seller has self-identified themselves as someone who is “motivated,” and they have reached out to a cash home buyer, the dynamic is this: “we both know I need to sell, and all that matters here is price. Give me an offer, I’ll get 8 others, and then I’ll pick the best one.” The stage is now set, based on your approach, and will lead to a certain dynamic in the negotiation.

#2: You are driving for dollars, and see a rundown house, so you knock on the door.

What’s the Negotiation Dynamic? The Seller realizes you see imperfection (and opportunity) in their house, so they feel singled out. They’re also forced to react to your unannounced arrival--you’re standing right in front of them, and now they have to respond, whether they are comfortable or not. The stage is now set, based on your approach, and will lead to a certain dynamic in the negotiation...a completely different Negotiation Dynamic than the first example.

#3: You sent a letter to the owner of a rental property in your town, simply introducing yourself and expressing interest in their property, and they call you back.

What’s the Negotiation Dynamic? You have no idea if the Seller is actually motivated or not; the Seller doesn’t feel you targeted them because you think they are distressed, rather just that you like their property. The conversation may move toward a sale, or it may fizzle and go nowhere. The stage is now set, based on your approach, and will lead to a certain dynamic in the negotiation...a completely different Negotiation Dynamic than the first or second examples.

These are three entirely different scenarios, that will naturally lead to three entirely different potential deals.

An important point: none of these strategies is “good” or “bad.” None of these Negotiation Dynamics is “better” than another.

The real question is, “what Negotiation Dynamic do you WANT to have?”

Which one fits your personal style best? Which one will allow you to shine? Which one fits your deal strategy best, and your business model? Which fits your skills best?

Once you know, then you can work backwards from the type of Negotiation Dynamic you want to have, and develop a lead generation strategy that will give you more of those situations.

I hope this helps!

Hi Mark--I'm a big fan of seller financing, and it does seem like it could be a good fit in this case.  Seller financing is really more about the seller than anything else (see this article I wrote on the BP blog about this: https://www.biggerpockets.com/...)  One of the major elements of this, which we have not yet discussed in this thread, is his attitude on capital gains taxes. If he wants to defer those, seller financing could be an especially powerfuly option. 

One thing I wanted to point out is that unless he really WANTS a short balloon payment (in 3-5 years as you mentioned), personally I would shoot for a MUCH longer term.  I find that many people assume a) seller financing loans are inferior, and b) that sellers don't really want to do them unless there are no other options....and then when they put those two things together, that means "refinance out to a bank loan as quickly as possible." That's not my approach, personally--I'd rather just negotiate a great seller financing loan for as long as possible, and avoid the headache and hassle of refinancing for as long as possible. 

I hope that helps! 

Hey Mike! To answer the question at the end of your post, fortunately seller financing is indeed available whether it's a "seller's market" or a "buyer's market."  There are always sellers who need the benefits that seller financing can provide them (income, capital gains tax deferral, a reasonable return secured by a tangible asset, etc.).  The terms of each loan will be different, of course, based on the seller's unique situation.  And whether you can accomplish $0 down is very unique to that particular seller (I'd say that's very rare in my experience).  

@David Kilgore  I ask for the seller's address, length of time owned, assessed value, absentee/owner occupied status, property address, sometimes zoning and lot size. 

David, I do direct mail using lists I get for free from the title company that I close all my deals through.  

Hi Arthur.  The letter content is really only relevant in relation to the people you are sending it to.  Who will you be sending this letter to? And what type of deals do you want to do as a result? 

If it's an older investor looking to retire, it's possible seller financing could be a good tool to help them--and help you.  If they have owned the property for very long, they may have a big potential capital gains bill. A well-structured installment sale (seller financing) can help them defer that gain without needing to do a 1031 exchange.  Have you explored this with them? 

To reiterate what many others have said, my vote is Seller Financing all the way!  

The main mistake I see a lot of investors make is trying to offer seller financing in situations where it doesn't really make great sense for the seller. The better approach is to specifically market to those people who would be good candidates for seller financing, and then make a deal from there.