All Forum Posts by: Seth Williams

B.A. in Business & Communications
M.B.A. in Business Administration
7 years as a commercial real estate banker
5 years heavily involved in real estate investing, particularly concentrated in raw land, rental properties and seller financing

I like your response Tom C. - that is the same line of thinking I use with long term debt. Though I ultimately follow most of Marc Therriault's logic when I'm deciding how much I'd like to leverage myself in any deal.

It's ultimately about cash flow for me. Especially with today's interest rates being as cheap as they are, it's easy to justify locking up a fixed rate loan for as long as possible (especially if it a deal cash flows at 2:1 or higher). If rates were 8%, that'd be a totally different story - but when it's just SO affordable to borrow, it's hard to pay with all cash even if you have the funds ready and waiting in the bank.

Hey James,

All good questions.

For all of my seller financed deals, I use a standard Land Contract form (aka - Contract for Deed). To find the right version for your state, you can check out this link here: http://retipster.com/landcontract

One option would be to have your contract drawn up by a lawyer, but I've found that they always charge a ridiculous amount for a very simple job. Personally, I always handle this part myself.

Since this is your first seller financed deal, it might be worth hiring an attorney (just so you can learn the process) or at least working with a title company, but that's up to you.

Regarding the down payment, it just depends on what works within your buyer's budget. I usually ask for somewhere between 5% - 20% (whatever makes me feel comfortable).

Most buyers have one or two things that they consider most important. Some people want 0% interest, some people want a low purchase price, some people want a low down payment, some people want a low monthly payment....

you usually can't give them everything, but you can appease them with one or two of these things. If you can give them what they want and still have a profitable deal on your hands, do it!

I actually wrote an ebook that explains this entire process in great detail. If you want me to send you a free copy, send me a PM and I'll get it in your hands. I think it will answer most (if not all) of your questions.

This process seems intimidating to a lot of people, but it isn't difficult or expensive. With a little bit of basic education, you can be on your way to financing ALL of your deals (and making a lot more money along the way).

James,

If you're financing the sale, you essentially are the bank. This means you can require any terms you want (within reason). With all of my deals, I usually require a large enough down payment to protect me in the event that they do default. I want to know that I'll be okay no matter what happens. I also charge 9.99% interest and people are more than happy to pay it.

When I utilize seller financing, I don't have to chase people for money. Ever. If they don't pay, they're out in 45 days - that's it. I get to keep 100% of every payment they've ever made to me, and I get to sell the property all over again (this usually ends up making the deal a lot more profitable than it was to begin with).

If I were you, I would make them handle both the payment of the lot rent AND the payment to you. Do your research on these people and once you know they're credit worthy, put ALL the property's problems in their lap, not yours. Remember, this isn't a rental property - if something goes wrong, they own it, which means it's their problem, not yours.

Evicting people can be a hassle, there's no point in sugar coating that part of it... but it's usually worth the hassle and (in my opinion, it's worth the risk). A lot of it depends on how much equity you have in the property. In my case, I typically have 100% equity in each deal, which frankly makes it hard for me to lose.

The more flexible you can be and the more options you can offer your potential buyers, the faster you will get this thing sold. If you're only willing to be cashed out of this property in one lump sum (and this is how a lot of people operate, btw), you could be sitting on it for longer than you really need to.

Hey James,

Have you considered offering seller financing on your property? I've found that seller financing opens up the flood gates to MANY more potential buyers for properties like this. It also generally allows you to get a higher asking price and earn extra interest & servicing income along the way. Seller financing has been a total game-changer for my business, because I can sell properties for a MUCH higher price, generate multiple streams of income and make a lot more money over the long haul.

Financing a sale isn't difficult or expensive. I do them all the time with minimal effort. It also generally isn't a bad thing if/when a borrower stops paying (which has been rare, btw), because you get to take the property back and re-sell it all over again.

Yeah, there are a lot of factors to consider - like:

- what your price range is
- what strategy you're using to pursue properties
- how much debt you can manage
- how well each individual property cash flows
- how persuasive you are
- how hard you work
- ...and a lot more.

Your goal does sounds really ambitious (the vast majority of people probably wouldn't be able to start from scratch and pull this off in one year), but that's not to say YOU can't do it. It's just important to manage your expectations based on what you're really capable of doing (which is difficult to know when starting out).

Roselynn,

If you're willing to do some negotiation and invest some significant time into the process, you could potentially generate this kind of monthly income relatively soon if you pursue sellers who are willing to finance the sale of their property (accept payment for their property over the course of several months or years). Buying properties will seller financing usually takes a little bit of "selling" (as a lot of sellers won't even consider this kind of transaction until you're able to help them see the benefit of doing so... then a lot of them are willing to play ball), but you'd be surprised at how many sellers will ultimately go along with this.

I know a few investors who buy ALL of their properties will seller financing (they literally won't do business any other way). The benefit here is that when a seller finances the sale, you can negotiate a loan with 0% interest, or no money down (or if the seller is motivated, maybe both). It's all about determining what is most important to the seller... Do they need to get their full asking price? Do they need to get a large down payment? Do they want to make interest income?

You can usually give them what they want IF they're willing to be flexible in other areas. For example, you could pay their full asking price IF they're willing to finance the sale with 0% interest and no money down. Or, you can give them a large down payment IF they're willing to sell for 50% of market value. You can pay them cash IF they're willing to sell for 25% of market value (this is my favorite approach).

You can give most sellers what they want IF you can help them see the benefit in doing so, and why it's in their best interest to give you what YOU need in other areas.

Justin Silverio, I have wholesaled some of them to other investors - but it's an issue of time. For every 10 offers I send out, I get 1 acceptance (on average). For every 4 acceptances I get, I'm able to assign these contracts to other buyers. Is it worth my time to make 40 offers for every one closed deal? Sometimes. Sometimes not.

Ultimately, the work-to-money ratio doesn't make sense for me. If I had all the time in the world to send offers to people, I could devote my life to this - but I have way too many other irons in the fire right now. I'd love to get a more efficient way of passing these leads off to someone who has the time & energy to pursue them (at a much cheaper price - like, $5 - $10 per lead, with no guarantees).

This is a good question Justin.

I also have leads coming out my ears for people who are willing to sell their properties for 40% - 80% of market value. But, since I only buy at 10% - 20% of FMV (the ultra-cheap stuff), I don't usually mess around with these leads, and they just go to waste.

I'd LOVE to sell them off to a realtor or other investor (assuming it were legal, of course).

Hey Kenneth E., great post - thanks for sharing these ideas. I've played with about half of these methods, but it's always great to get some new inspiration.

I was curious, where do you go about getting lists of people who have inherited their properties? I've also found these to be EXTREMELY valuable leads, but I've never figured out how to whittle down my list to ONLY these people. Usually they just get mixed in with a much larger list, as I don't know how to pick them out of the crowd.