Owner financing real estate strategy – how this works!

Today’s guest started his real estate investing career at age 23. Over the years, he has purchased close to 2,000 houses in and around San Antonio, Texas. After more than 3 decades of investing in real estate, he has also mastered the art of owner financing properties.

I’ve heard about owner financing a lot on the buy side you know people are always talking this to sellers about potentially owner financing and investment they’re interested in but i don’t hear about it as much on the sell side what you’re doing so could you kind of walk me through like the numbers on a typical dealer how does this the mechanics of this work you

Buy it for x and then you’re the bank size up your deal before you can even make an offer so what can you sell a house for and it has nothing to do with columns it has nothing to do the miaa appraiser move on down the road babies don’t care what you say i mean it’s kind of interesting what you say but like it’s not gonna affect what i’m gonna do other than the

Fact that it’s just going to reinforce what i’m gonna do because you’re the bank and ya can’t get a loan and this mi-ae appraiser where the bpo the brokerage professional opinion or the cma from the real estate agent they’re all giving me calls from someone who had a good credit score and went down i got a new loan that’s not who i’m selling my house to i charge

Ten percent for thirty years the only thing is is like i pick a price point and i pick and i and i got a formula that i back into the rents to establish my price so that my house is about the same give or take a hundred bucks per month as the rental across the street you know i have a 3-2 with a two-car garage right across the street is the same floor plan but

Flipped and in different color paint and it’s written for 1,200 a month and i’m back into my the red formula and i find out what is what can i sell this house for so the piti payment principal interest taxes interest and maybe servicing fee because i always include piti s principal interest taxes insurance and servicing fee so i figure out what my servicing fees

Gonna charge me and i charge my buyer that in the contract bam one set of work not having to be done by me and having to be paid for by me so that the guy that’s reading for 1200 says why the hell am i reading that guy’s that payment on the guy sounds like an all that house with 1,200 a month i’m running over here you know the only difference the only separator

Being do you have a down payment because i require at least 10% down my average 12% down by the way i averaged nine days on the market in the last 350 houses before coated i’m still selling houses but but not quite as fast right now still getting great down payments up thanks so here’s the formula you guys ready i invented the ofv the owner financed value there’s

The arv and there’s the mayo and perhaps mitch steven invented the owner i do not have anyone dispute you yet but you got a copyright it let’s go to let’s say the rent is a thousand bucks don’t don’t split hairs over the numbers or the smallness of the numbers or compared to your city or whatever just go by the theory we got the rent and underneath the raid

Put a thousand dollars – parentheses property taxes plus property insurance monthly okay monthly property taxes plus monthly insurance close parenthesis so under property taxes put a hundred bucks under property insurance put fifty bucks per month so you got a thousand dollars rent coming in – one hundred fifty dollars of property taxes and property insurance

Equal i’m sorry times one one five not point anything just times one one five one hundred fifteen underneath that underneath one fifteen that’s a multiplier for thirty years ten percent so the 850 represents how much money this purse i’m sorry yeah let me back up i’m screwing up my own formula look val the minus 150 equals 850 that’s how much this person has

For principal and interest taxes and insurance and possibly servicing fee okay hey that’s what’s left over because out of the thousand they’re paying the tax guy owns some of it the insurance guy owned some of it so this all he’s got left for principle interest is is 850 times 1 1 5 that’s a multiplier this payment amount 850 the most it’s a multiplier for 30

Years 10% you could go give to an amortization schedule do 850 and then put in 10% as the interest and put in 30 years as a term and solve for the balance or you could just multiply on your dollar calculator 1 1 5 and you’re going to come out with 9000 i mean ninety seven thousand seven hundred fifty bucks which in my world is 98 thousand i always round off and

I always round in my favor and so they can afford to finance 98 thousand at 30 years at 10 percent and having paid 850 and by the time they add the property tax in the insurance they’re up to a thousand give or take and and so this i’m making a switch here i just want someone to trade where they’re making their payment yeah so the question is if they can afford

To finance ninety eight thousand what does that make the price of the sales price of the house well i want at least ten thousand down but i never shoot for minimum so i i’m gonna ask for twelve for sitting down and i’m gonna multiply i’m gonna add twelve percent on the top of ninety eight thousand so nineteen thousand if you add twelve percent on ninety eight

Thousand on top and i’m eight thousand comes out to a number that’s really close to 110 thousand so the owner finance value is 110 thousand i don’t give a crap what what the cops say because my guys can’t buy those houses i want to you know everyone that comes and goes well the house is this favorite murder worth $87,000 and you’re selling here for 110 great go

Get one of those you need to go get one of those well he oh really you know yeah what you gonna stay renting for the next thirty years where you’re ripping these people off because these houses are only worth eighty seven thousand i have the cops right here i’m a i’m a licensed realtor i say yeah and i think i said well why are you saying that because this man’s

Paying a thousand dollars and ran and it’s a thousand dollars for this house what will the ritz be in his rent house in 15 years they him hall randolph i said no give me a freak i need a number what’s the main gonna be in 15 years okay from a thousand fifteen years eighteen hundred two thousand hey what’s it gonna be in 25 years what’s gonna be in thirty years you

Know this guy’s payments fixed families making now and he’s and he gets all that appreciation for that 15 20 25 years what’s the landlord giving him appreciate how much this appreciations landlord giving this guy see i’m not screwing this guy the landlord screwing the hell out of this guy that’s my argument yeah so any he’s paying the basically the difference in

What he’s paying is because of the financing i mean he’s paying extra to like a tote your note car lot yeah person doesn’t give a damn how much the car is doesn’t give a damn how much the interest rate on the car is just wants to know what’s the down payment and how much can i have how much to help but the good news is a car depreciates some value and probably

Will run out before they even finish making the payments on it’s not worth what it’s what they owe on you i mean let’s let the case in the house definitely if you’ll just paint it every now and then a mobile yard when it’s supposed to be mowed and fix the roof when it leaks you know hey hope you enjoyed this portion of the interview with mitch stevens this guy

Is a wealth of knowledge if you want to check out the full podcast interview you can listen to it on any podcast player it’s the living off rentals podcast also you can go over to facebook and check out the living off rentals facebook community i know you’ll get a ton of value out of that it’s a super engaged community and i hang out there a lot of other really

Smart rental property investors hang out there i hope to see you there if not i will see you in the next video

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Owner financing real estate strategy – how this works! By Living Off Rentals