Ain’t it great?
Seller financing that is…
Without it where would I be? It was a strategy I learned early on as a real estate entrepreneur; it’s a strategy I continue to use today.
But I’m not the only one… and it’s not a new way to participate in deals.[tweet “Seller financing is AWESOME!!”]
Let me back up.
You might wonder how I started using this killer strategy and how I get sellers to work with me by carrying all or part of the financing.
That’s a fair question.
It really started when I was a wholesaler. That was almost a decade ago now, but the basics I learned as a wholesaler stuck with me. While I don’t participate in wholesale deals today, the experience I learned as a wholesaler in real estate was invaluable![tweet “Where you start in real estate investing doesn’t dictate what you do next!”]
For example, I has to push myself out of my comfort zone to actually talk to people. Believe it or not, that was REALLY uncomfortable for me. Admittedly, I’m not real chatty even today, but I was able to learn to be a good communicator, which was absolutely necessary if I would be talking to sellers, buyers and investors.
As someone who buys rental properties, including properties that would make most sense as vacation rentals, you better believe I talk to lots of sellers and investors.
I’m the buyer in this case… who uses OPM to make deals happen… which means I get to raise private capital (as well as getting sellers to work with me).
In case you’re wondering how this works, I touch on how to raise private capital in a quick video I’ve posted below:
While vacation rental properties is something I’ll talk more about in the future, right now let’s stick to how building your communication skills is necessary when looking to buy rental properties and getting the seller to fund the deal.
The good news is… just like me… that you can learn this skill.
Develop your communication muscles for the strongest results!
You might think that talking to sellers, buyers and investors means you’ll do all the talking. But that’s not right. To get to your desired result will require you to become a stellar listener.
The more you let the other person talk, the more interesting you’ll be to that person. (That’s your free and very helpful tip for today.)[tweet “Wanna be more interesting? Let the other person talk!”]
Once you learn to be a better communicator and way better listener, you’ll find that it’s much easier to talk to sellers about the possibility of their carrying some or all of the financing. You’ll be able to show them why it makes sense for both the seller and for you.
Working together can actually put more money in the seller’s pocket than if he/she were to take the traditional path of using a Realtor or broker. But there are things you have to know about the seller first, which requires good questions and conversation.
Basic information you need upfront includes…
- Learning if the person you’re talking to is really the seller – You’d be surprised, but some people who tell you they want to sell a property don’t have the legal right to do so. Finding out who the actual property owner is would be your best starting point. There are different ways to verify the information.
- Finding out what the seller intends to do after the sale – Is he/she going to want to buy another home, larger or smaller, or is he/she moving out of state to live with a relative, or is the seller going to be retiring… or what? This helps you make a sensible offer. (Every seller has a different situation, and you have to learn more about that person to figure out if it makes sense to work together or not.)
- Getting the seller to tell you how much money he/she NEEDS – Understand that this is way different from the sales price. For example, maybe the seller only needs $50K. So if you could come up with the $50K by raising private capital from an investor to satisfy the real need, the seller may be interested in carrying the rest of the financing. Sometimes the seller doesn’t actually need a big chunk of change upfront. That’s perfect for him/her to carry the entire deal. (And, yes, there are lots of examples of people doing this… not all markets are like that of California, but even in this state there are plenty of seller-finance deals available!)
Of course, these are just three bits of information you need to learn from the seller before you can make your offer, which ultimately will include seller-finance options. And, yes, that’s plural; every offer you make when you want to buy rental property for whatever reason needs to have different options. I typically give sellers three options.
There will be some back-and-forth in your negotiations until both sides are satisfied. If you want some quick tips on negotiating and how to avoid mis-steps, click below:
There are different ways to work with sellers…
When I say “seller financing” or “seller carry back” you might think that’s just one way the seller can work with you. The truth is far different.[tweet “There are 6 ways to work creatively with sellers, buyers and investors.”]
When it comes to working with sellers, there are lots of ways to slice that pie. But that’s a course on its own. In fact, that’s why I created one for Creative Acquisitions and Creative Financing Strategies, which you can find on www.CashFlowDiary.com/products along with a lot of other great courses!
The long and short of seller financing is that sellers are more open to it once they understand the difference between receiving a small pile of money vs. the benefits of earning an ongoing stream of income. The latter is very attractive to all sorts of people… not just sellers either! (Just ask my investors.)
Hey, wanna get a quick hit of info on this pile vs. stream discussion? Watch this:
Since the video doesn’t go very far into the topic, the principles behind creating streams of income through real estate transactions are laid out step by step in my book, which you can get for free if you click into the box below…