SELLER FINANCING – PROFITS WITHOUT RISK
Seller financing happens when a property owner sells his property and agrees to carry back or finance the amount of the sale – less the amount received for a down payment. Say for example — The selling price is $100,000 and the down payment is $10,000. In this case the seller would agree to finance the balance of the sale price, which equals $90,000. In other words, the seller substitutes himself in the place of a bank or some other institutional lender.
When you develop the skills to negotiate and purchase properties using this type of financing, you’ll be setting the stage for some very lucrative profits that the average investor don’t even know about. Not only will you place yourself in a position to earn future profits, but you’ll also enjoy a much safer investment strategy without any personal risk. We’ll discuss this safety feature a little bit later, but J can assure you it’s very important and could very well save your bacon someday!
BANKS ARE VERY SHY ABOUT TAKING RISK
When you borrow money from banks to finance real estate, you’ll quickly discover rental houses and small apartments, especially those with more than four units are a whole different kettle of fish than financing the home you live in! Mortgage money for investment properties is generally classified as commercial lending and most always comes at a much higher cost than residential loans. The reason is because bankers feel commercial loans are much more risky than a homeowner’s personal residence.
The theory, of course, is that one would be much more willing to walk away from investment property before surrendering his own personal nest! Personally, I think exactly the opposite way! Parting with my personal residence would come much easier than giving up income-producing assets that put money in my bank account every month! After all, it was my investment properties that earned me the cash to purchase my personal residence in the first place! Obviously, they can do the same thing again if I keep them.
HOMEMADE LOANS ARE ALWAYS AVAILABLE
Bank financing is not always available when you need it, whereas seller financing is! During the Jimmy Carter presidency, commercial loans were nowhere to be found for investors like me. Yet, I survived those years ‘very nicely because I negotiated all my deals creating mortgages between myself and the sellers! My kind of seller had to finance his sale because no one else would! It was seller financing or no deal at all!
Sellers who wish to sell rundown houses or problem real estate are in a very weak position to negotiate because 95% of all potential buyers don’t want their problems! When 95% of my competition drops out of the bidding, it puts me in a very strong position 10 have my own way with the seller. This is the way to start making money in real estate, Eliminate the competition so you can start dictating the terms — See how easy this is!
Besides being always available, there’s no set of rules or bank regulations you must follow! You can design the mortgage and the repayment schedule to fit your situation.
You can amortize the loan, pay interest only at whatever rate you can negotiate or even make once a year payments on the balance. There’s no loan committee waiting to approve it. You and the seller are the only committee!
BUILT-IN SAFETY FEATURE OF SELLER FINANCING
Earlier I told you that seller financing was a much safer strategy than a regular bank mortgage! That’s because seller financing is not really a loan! It’s called a purchase money mortgage —And unlike regular loans, not one penny of cash money is actually disbursed. It’s really an extension of credit granted by the seller to facilitate his sale!
Should something go haywire and you find yourself unable to make the payments – and you default the seller (lender) can take his property back, but that’s all! He cannot take other assets you own to satisfy the unpaid balance or deficiency. Most bank lenders can come after everything you own to satisfy their mortgage debt because you are personally liable until it’s paid in full.
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