Obtaining Seller Financing on a Property

Getting seller financing on a property can be more easier than you think. The goal is to create a “win-win” situation for the seller, and in this video, I explain my process to obtain seller financing.

Seller financing it is a big question that i get all the time and the the reason why i get the question is because i get seller financing all the time so people want to know john how do you get seller financing i’m going to go through some of that in today’s episode i also have a special gift for you at the end you’re not going to want to miss it um stay tuned and

I’m going to go through how to identify and get seller financing on commercial assets and then we’ll do this ding ding okay i’m back but listen one of the things that we really get like seller financing was here and it was called miniature ponies was right underneath why are you guys searching me uh through miniature ponies john troutman miniature ponies listen

You guys are weirdos but that’s regardless they’re called shetlands like they have a name not miniature stop okay so seller financing we did get seller financing i get seller financing often i had a conversation with a guy yesterday i’m going to get seller financing on a much bigger deal and i want to explain like there are some reasons why commercial assets

Are easier to get seller financing on there here so let’s just go through one how many people do you know that are in real estate now think about all of them how many of them are in commercial real estate that just went way down right so everybody you know is like a fix and flipper a wholesaler they’re doing all that stuff so because it’s commercial there’s

Just less people in that bucket now let’s talk about residential when you do a residential deal like let’s face it people don’t have to do seller financing i don’t think i would do seller financing on a residential deal i have and i have recently but i don’t think i normally would right so under is a unique situation but under usually there’s so much demand for

A residential deal you don’t have to worry about seller financing it’s going to sell also when you buy a residential property and you get a mortgage what is it that they look at on that mortgage they look at your credit and your income now on commercial they’re looking at the asset as an independent now granted you as an operator you as a owner they’re going to

Take that into consideration obviously in the underwriting of the deal but primarily what they’re underwriting is the asset is this an asset that if they had to take it back they they could run it and is it creating cash flow so to take a debt asset so this was making no money it was needed massive repairs i call that the heavy lifting the heavy lifting is me

Coming in identifying what needs to be done and just doing it right so i have an equity lift in that alone but also i’m able to negotiate terms very favorable terms typically with seller financing so just think about this the people that own this know like hey this is hard to finance because it has no income coming in so someone either has to come in with cash

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Or they’re going to have to find a hard money loan or something like that private money so instead of sitting on it so this product’s been sitting here for i don’t even know how many years four or five years and all of a sudden it was marketed weird and all this other stuff but i ended up getting seller financing we got it for 100 bucks a foot it’s 5 000 square

Feet so it’s five hundred thousand i put a hundred thousand dollars down so there’s a four hundred thousand dollar mortgage the payment’s roughly seventeen hundred dollars so what we’ll end up doing i got a three year term on this um what we’ll end up doing is we’ve done the improvements we’ll get it stabilized and then we’ll look at either refinancing or just

Letting it and watching our cash on cash of what we’ll get so right now we’ve probably got eight letters of intent for around six thousand dollars plus triple nets um we’re putting some money into this that i didn’t fully expect us to so i’m now thinking it’d be nice to refinance take this out and then have uh this thing fully cash flowing so let’s talk about the

Deal specifically of why i ask for seller financing right so again you have to have a cash flowing property typically for you to go to a bank and refinance sorry i’m sweating i’m in phoenix here’s another reason the reality is it’s hot as blazes here in phoenix and nobody’s buying real estate i think i’m the only person out there buying stuff sometimes so i mean

Who else would stand this heat so that’s one thing go to an area no one wants to be no one wants to do commercial real estate in phoenix that’s a joke but in the summer i’m probably going to find better deals i mean i’m i’m look at this i’m sweating like a pig okay so that’s one way find and if you’re in detroit in winter and it’s snowing like crazy guess what

I get good deals there in the winter like nobody else is out there right like so you’re doing things that just are a little uncomfortable and that most people don’t want to do on commercial also getting seller financing think about it like this this person’s own or entity in this situation a company has owned this asset and really it’s a non-producing asset it

Creates no money for them on a monthly basis you get deferred maintenance and you know things just start happening to the property we’ve had to put a whole new roof trust system all that stuff into it because it’s just been unattended to so you call that deferred maintenance i call it neglect whatever you want to call it right so this property is being neglected

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But they still have taxes they still have bills that come up so it is a it is a um a liability as far as like insurance and all these things that you’re paying out on a monthly basis so what the way i see it just is it’s just pure business in residential it becomes very emotional because it’s people’s homes and things like that but in commercial real estate it’s a

Transaction so they look at it like i gave them a hundred thousand dollars down they’re getting a five percent return on their money but but more importantly they don’t have the monthly expenses the issues with the property now those have become my issues i’ve taken them on i also i’m doing what i just called the heavy lifting which is repositioning the asset i’ve

Sand blasted the brick we’ve put the posts in we’ve fixed the trusses we’ve added the ac’s we ground down the concrete um you know cleaned up the yard you know all these things that were neglected that needed to be replaced and we’ve replaced them and so that’s money time energy that they haven’t had to come out with now let’s just say hypothetically i screw this

Whole thing up and i lose the property i cannot make the 1700 a month payment for whatever reason that’s not gonna happen i would sleep in here i’d i’d sleep right here okay so um and i would so let’s just talk through this real quick i’ve given them a chunk down i’ve taken the liability away i’ve done the improvements to the property and they’re getting a monthly

Uh return of five percent on their money right on what they’ve lent out so if you look at that compared to what they were with no money coming in liability and deferred maintenance happening or neglect the building and all this stuff what would you do so they’ve done the seller financing i’m happy for that i was able to get it it’s given me the opportunity to

Get in here with very low money but also more importantly not all the headache of of going through all the hoops to get financing if i was able to right so we’re almost done with the stabilization of this property it’s probably going to be an event space but this is one way to get seller financing is uh just put yourself i mean we’ve heard this a million times

Like if someone has a problem if you could be the solution to that problem you you bridge that and you could sell them they they tell people if you’re in sales be the problem solver well i’m a buyer they’re a seller and i’m now that i’m there um i’m their candidate to buy so i’m and i’m probably a pretty profitable one for them just looking at the long run of

What five percent is at seventeen hundred dollars over 36 months which is let’s just look i’m not good at math you guys which is an extra sixty one thousand call it sixty thousand dollars uh over the term of the loan so they’re getting an extra 60 000 in revenue by doing nothing right so just think as a business person don’t be emotional about the about it and

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When you’re buying don’t be emotional about it either like the number one thing i learned in real estate when i first got involved carl taught me was do not chase the deal do not become emotionally involved once you become emotionally involved i don’t care if it’s buying a piece of real estate or buying anything you’ll be buying a car you could also be buying

A business or whatever if you become too emotionally charged typically you end up overpaying and making a bad decision i’m always at any point willing to walk away from any deal this week this last week i’ve walked from a deal i’m glad i did because it’s just like those deals if you chase them as bad as i wanted that deal they they typically show later that it’s

Good that you didn’t at the end of the day you don’t want to overpay this is a i’m in business to make money not for for my ego right although that’s nice to feed the eagle what you want to do is feed your wallet so ask yourself what’s bigger your ego or your bank account i’m always going to choose i want my my bank account bigger so i have to humble myself not

To change chase the deals and be able to walk away from deals when they’re no longer deals so do your math know your numbers know your exit strategies strategies not just one so on this we have multiple exit strategies we could sell this for a nice profit we could rent it out for a nice profit what we’re probably going to do is create since it’s a beautiful spaces

Just create a space event space that we can rent out and monetize ourselves why not someone else is going to come in and do it and make a ton more so we’re looking at doing that as well i also don’t at the same time don’t want to get into a bunch of different businesses but this one seems pretty simple and i’ll probably partner with someone that is great at that

And we’ll go ahead and monetize the space even more anyway seller financing i told you to stay tuned until the end what we’re going to do is we’re going to do a call coming up if you click on the link i’ll give you the date of the call and we can go through all of this in more detail if you have a deal that you want to bring on that call and we underwrite it together

I’ll show you how i underwrite these deals as well anyways i appreciate you guys listening to this and listening to what i have to say today if you like it uh give me a thumbs up if you hate it give me a thumbs up anyways i appreciate you guys watching see you guys soon

Transcribed from video
Obtaining Seller Financing on a Property By John Trautman