How do you structure
seller financing? That is today’s show. Let’s dive right in. Hey everybody, welcome to the
Investing in Real Estate Show. I’m Clayton Morris. I’m Natalie Morris. And this is the show where
we talk about building legacy wealth, buy and hold real estate
for the purposes of creating passive income. And I’m super excited,
because today we are going to talk
about seller financing. Which is a really
powerful strategy to help you go out
there perhaps, and get your first rental property. Particularly if you don’t
have any money to work with. We hear from a lot of investors
that we speak with that just don’t have the cash, they
don’t have the means, to pick up that first
rental property. And this is a killer
way to do it, right? It sure is and I was
talking to an investor recently about how
sometimes you offer a discounted price for a
property and the owners like, no, I can’t
take that low price. And I said, well, what
about seller financing and this person didn’t
know what that meant. And I thought well
this is a good thing to talk about on our podcast,
because we talk about– I want to say like a
buffet of resources for acquiring rental properties. And in our house,
we use all of them. We have, I think,
one or two deals we’ve done seller financing. We’ve talked about using your
401k, using your Roth IRA, using private notes. And so this is just
one of the ways that we build out
a large portfolio of rental real estate. And so I will give
you our disclaimer. We don’t have a way to make
money off of you doing this. We are not financial advisors. We’re just a family that
invests in real estate and does this show to help other
families learn how we do it. Because we’ve had some great
success doing this and building up our rental portfolio
in order to have passive income in our house. So that we don’t have to
work for the man, right? That’s right, that’s right. And so a few little
housekeeping things before we dive into today’s show. We’re wearing some
fun shirts today. I’ve got a shirt on. If you’re watching the video
feed of this you can do that. You can go to
iTunes and subscribe or you can check it out
on our YouTube channel. But so I’ve got a fun shirt
on today, says, Goals at Work And which one do
you have on there? Mine says, Attitude
is Everything, although my microphones in
the way so let me stand up. Here you go. Attitude is Everything
is what hers says. And the reason we’re
wearing these shirts today is because I wanted to
promote and help a friend. Now a friend of the show, and one of our investors who
worked with our company, Morris Invest. I think about 1 and 1/2
to maybe 2 years ago, and has acquired a number
of rental properties. Well recently he sent us a
note in the office and said, hey, because of
the passive income that I’ve now been able
to create in my life, and because of the properties
that I’ve purchased. I’ve been able to take
on this passion project that I’ve wanted to take on
for a while, which was creating this t-shirt company. All around taking
action and creating goal oriented lifestyle, really
inspirational t-shirt messages. And so he created
this company and these are some of the first
shirts off the line. GVP, called Good Vibes Promoter,
is the name of the company. We’ll link to it in our show
notes page for this episode. But I’m super
excited about that. How great is that? I know it’s so awesome. Because sometimes
when people ask about building a real estate
empire they think well I don’t really want to
work in real estate. That’s not my passion. And I say, well, yeah, you
don’t have to be a realtor or actually paint walls. You can be a passive
investor and then also pursue your dream. Like Clayton’s dream of
being an underwear model, he can still do
that on the side. While investing in real
estate, right, honey? That’s right, that’s where I
bring all the big dollars come in through my
underwear promotions. Yeah. So Good Vibe
Promoter, is the GVP. We’re going to put
this in our show notes page for this episode
over at morrisinvest.com. So go there, support him. It’s so great that
one of our investors took on a passion
project and thrilled. And by the way the t-shirts are
really well-made, and they’re– They are, they’re really
comfortable and they fit nice. I don’t usually like
those giveaway t-shirts you get that say gum
company or whatever when you’re at a concert. I’m like I’m not
going to wear this, but this really fits
nicely for women. I’m picky about t-shirts and
I really like the fit of it. Yeah so, hey
congratulations Keith. Thanks for taking
action and thank you for sharing this with us. We’re really excited about that. And also just to wear
around something that speaks to your own values is awesome. I put it on this
morning at breakfast. My son just started
learning how to read and he was reading the shirt. And he says go– goals
at work, goals at work. I said, yep, I’m at work. Working towards our goals. And I love that. As opposed to once
I was on a boardwalk and saw a shirt that
said don’t ask me for s. That’s that guy’s values. A little bit of a
different value proposition from Keith and his company. So anyway, housekeeping
out of the way. Let’s dive in and talk
about seller financing. The idea behind seller
financing is the idea that the seller might not
want to sell the house and get hit with
capital gains, right? First of all, why
would someone want to sell a house with
seller financing? You’ve heard Tom Wheelwright
here on our show talk about– that well you can
save on capital gains. If you’re not selling
the house all at once by doing seller finance
you can structure it any number of ways. And a seller, it’s very
attractive to maybe a tired landlord that
has 10 properties. And is around retirement
And just wants to unload these properties. Well for them to
sell them all at once that will be a huge tax
hit, for that individual. Right, there are a couple
of reasons actually. That’s only one reason to do it. Another reason maybe
the buyer can’t get what they want for the– or the seller, rather can’t get
what they want for the house. Like they want to sell
it for a higher price, but the market is not such that
they will ever get that price, right? But what they need is
some cash out of that. And then maybe they can keep
it and make a little money just by getting out from
under that debt, which is that monthly mortgage payment. So for instance, I
had a client when I was being a little bit more
active using my real estate license, who wanted
to just retire. The taxes were too high
in the town he lived in, and he wanted out of this house. Well it was a three
family home and it could rent for a pretty penny. He just wanted
out from the taxes and out from the
mortgage payment so that he could go and
retire in South Carolina. And so what would have
worked great for him– and I just couldn’t
talk him into doing it, because he was a little
too skittish about it. But I still think
about this guy, and think that that would
have been his solution. Like someone could have said,
hey, I’ll offer you, let’s say, $20,000 down, and then
I assume the Note. That means I pay the mortgage. The mortgage now comes to me, I
pay that and the taxes as well. And so then you just get a
check in the mail every month. You pay that mortgage,
but you walk away with an actual
sizable down payment. And so that’s how we
did one of ours, right? Right. Yeah we did one of our
properties in what, Pennsylvania, right? Is one of the rental
properties that we had. And she didn’t want
to have to take the tax hit on the property. And so we offered a down
payment on this property. On this– it was
recently renovated Single family. Single family in a small
little Pennsylvania town. And I had found it on
Craigslist, actually, and I thought here she’s
willing to do seller financing. It’s not necessarily
a question– it’s not necessarily
something you’re going to see in a listing. If you’re on
Craigslist that someone might say seller financing,
but sometimes they do. But you could just call them
up and ask that question. And as part of a strategy
if you’re an investor trying to find distressed
properties you’re on the phone trying
to find deals. That’s a question that you
should really ask anybody who agrees to sell their house. Yes, I’m interested
in selling this house. It’s been a burden for me. I live in California. It’s in Colorado. I don’t want to deal
with it anymore. Great. Well would you consider
doing seller financing on it? In fact, I’ll even pay
you more for the property. Why does that make sense? Well because now I can come to
you with a small down payment. I’m willing to pay you maybe
more than you actually wanted. You wanted $40,000 for it? Well what if I could give
you $43,000 for the house and we’ll do seller financing. You can structure these
as three to seven years. Maybe I could pay you
for three to seven years to pay the house back. In fact, what’s the
average current going rate for interest rates? Is it 4%, 3.75%? What if, Mary, I could
offer you 4% or 5% interest for seven years? I’ll put down $5,000. And now I get this
property, and I’m able to cash flow
well above that on the backs of this seller. I mean the idea is that
this seller is now carrying, I don’t want say carrying
the burden, but they are. The seller takes the
role of the lender. Instead of giving
cash to the buyer the seller extends this
credit to the buyer for the purchase of this home. And that’s what we’re
able to do in Pennsylvania with that property. Right. OK, so people might hear
of this and think well wait I’m trusting a stranger
to now pay my mortgage payment? No way, Jose. But you actually close
this with an escrow company and you do have formal
liability now as the new owner. You are now the owner. The tax bills now
go to your house. So the city thinks that
you’re the owner, right? It’s not like, oh,
OK, just go away, and I’ll pay you
money every month to pay your mortgage,
maybe, right? You actually have to do it there
is a properly structured Note. It closes at the title company. Right, yeah and the bottom
line is that Mary, the seller, becomes the bank. Just think of it
that way, right? She was probably
putting out the property on the open market
thinking that they were going to try to sell
it the traditional way. Maybe they’re even
using a realtor. Who knows? Or they were considering
using a realtor. She tried– this one
deal we’re talking about, she tried to use a realtor. And she couldn’t get
what she wanted for it. She was recently widowed
and she didn’t have– she wasn’t up to taking
care of it anymore. So she didn’t want to
take a loss for it, and she didn’t want to
take care of it anymore. So it was a good deal
for her, because she got a big chunk of change, which
she needed now that she was in her retirement and alone. And she then got
cash flow every month where we would get
the money to her. It would arrive– she
wanted a proper check. So we automated that
through our bank so that it was sent
out every month. She got it, she
cashed it, and then she made her mortgage payment
to the mortgage company. Right, so there are a
couple of things and reasons why this is so great, right? You can structure this any
way that you can imagine. So I mentioned one way, which
is sort of a traditional no way, right, three to seven years. Say hey, Mary I’m going
to pay this house– I’m going to pay you. We’re going to structure
this Note for five years. I’m going to pay
you 5% interest. And I’m going to put $5,000
down on this $80,000 house. So she’s now getting
a check for $5,000. She gets to walk
away from this house. Hallelujah, I don’t want to deal
with this property any more. And that $5,000 was probably
more than she would have got had she sold it
on the open market and then had to pay
off her mortgage and pay the realtor
and the taxes, right? So I mean it’s
attractive to the seller, because when you look
at your HUD statement you see this house is
selling for $80,000, but $70,000 is what’s
left on the mortgage. $8,000 goes to the realtor. $2,000 for taxes. Probably she was only going
to get $1,000 or $2,000. But instead we’re saying here’s
a lump sum of cash for you to A, assume this risk now
being the lender and B, let us now work our
way into owning this. And then after a certain
amount of years then we own it, not you, you’re done, goodbye. You’re paid off. Right, and so let me go into
a couple of these things. First of all, it’s
great for her, because again, the
capital gains issue. Now she can spread the sale of
the house out over five years. You can even go higher,
you could say 10 years and some people, even
retired investors, understand the value of it even
being structure for 15 years. Because then they can actually
pass that onto their children and they’re not getting
hit with that capital gains in their lifetime. They could structure it as a
30 year Note, if you wanted to. There was one woman I
was talking with about a property in Mississippi. And she owned like 30
properties and she was willing to do seller financing. And she said, look
I’m 89 years old. She was willing to
do a 30 year Note. And you think, well
that’s ambitious, right? She’s going to live
to be 120 years old. Well no she understood
what would happen, right? That that burden would not
pass on to her children. The capital gains
burden wouldn’t pass onto her children, but
the value of the Note would. It’s a brilliant
move for her, right? So the tax that the family would
have to pay wouldn’t be there. But the Note she could
transfer that to her children, and the value of that
asset would transfer. You know that’s what
Tom Wheelwright has talked about here on the show. Which is it’s great, right? That’s a really killer strategy. So another thing I wanted
to talk about there is– so that’s one way, right? Just sort of a
traditional Bank Note. I’m going to put down $5,000. Maybe we’ll carry it for
five years, seven years. OK and we’re going to do– Before we do that why don’t
we talk about the value to the buyer though. Because we’ve laid out why the
seller would want to do this, but why would you as the
investor want to do this? It may be obvious,
but I just want to touch this home before we– That’s a good point. Well why? Because you don’t have the cash. So you might have $5,000
to put down or $2,000, but you don’t have
$100,00 to buy a house. She is interested in
selling this house. Maybe she’s doing it
for sale by owner, you don’t want to
get a mortgage. You don’t also then get a
mortgage on the property, and you don’t have
to carry that burden. But you could do it this way. And you’re able to get
into this property, because you might
have terrible credit. So you might have bad credit. You might have had a foreclosure
in your past, in your history. You might have had a
short sale on your record. You might not have the income. Maybe you’re self-employed,
and you don’t have, what is it, a w-2 from your company? I always get them mixed up. Is it W-9 or W-2? W-2. –Stated income, right? You work from home and you do
odd jobs, you’re a landscaper, you’re a freelancer. So you don’t have
what the government or a traditional lender like
Wells Fargo might ask from you. So this is a great way
to get rental property. To get a property without having
to go through all the hoops and hurdles that
many people do when they’re getting a primary
mortgage on their house. OK, but I also wanted
to make the point, yes it’s great for you to
have a nontraditional way to get into the market. But, also it’s a way for you
to cash flow something right away if you do your homework. So on the property that
we were talking about we gave her a lump sum of cash. I think it was like $20,000,
which was definitely more than she was going to make
on the sale of that property. And then we were going to pay
her, it was something like $400 a month, because that was
what her monthly payment was on her existing Note. Now we figured that
we could afford to pay her $400 if we
rented it for $550 or above. And the market dictated that
we probably could do that. So if we’re renting it out
for $550 and our Note is $400 were cash flowing $150 a month. And that works, right? It’s not a ton of cash, but
we’re cash flowing on it. We can pay the taxes, and we
can pay the property manager. It’s not a ton of cash,
but it’s a little bit. And at the end of this
Note, then we own something, and that cash flow is all ours. Right, we are immediately
adding to our net worth with the purchase of this property. On the backs of
someone else allowing us to buy it from them. You’re right, you’re
right about that. And the cash flow,
the immediate cash flow you just have to make
sure that your numbers work. I would reference you back to my
episode– make sure you go back and watch the video. Or listen to the podcast where
I talk about the three stages of real estate investing. And what Gary Keller’s
model is, remember you’re making sure
that you’re taking out that 40% for vacancy,
repairs and expenses. Because you don’t
want to– and we, because the house
was already renovated and because we knew
the taxes, that amount, that differential
worked for us, right? The ROI was there. It was a high ROI and we were
able to make the numbers work. Don’t fall in love
with real estate. Fall in love with ROI. Make sure those
numbers work, otherwise it’s going to be a
crappy deal for you. And another reason why this
is a benefit to a buyer. Now this is a little high
level ninja trick here. And I’ll let you in on a
little secret and I did this. Now one of my mentors in
the business, Todd Toback, said here’s why seller
financing is killer for acquiring properties. If you can find these deals. Now you are going to find a
ton of them every day but, if you find one– This is why it can
be a killer strategy. Because you’re agreeing to
that maybe ten year pay off or seven year pay
off with this seller. You’re going to put down $5,000. You pay for a year,
you pay for two years. Now if you go back to the
seller, maybe two years later, and you still owe
$20,000 on the house. You could say,
Mary I’d like to– would you be willing to
accept $10,000 right now, and we call this deal closed. I’ll give you a lump sum
cash check for $10,000. Now bear in mind that’s half
of what you still owed her. But she gets it all. She gets it all right now. I’m going to give
you $10,000 today. I know we still have three,
four years left on this Note, but what if I just give
you $10,000 right now and we wrapped up
the deal right now. Nine times out of
ten that person is going to be happy
to get a lump sum chunk of change of $10,000. Rather than waiting
an additional 3, 4, 5, 6, years for
the remaining $10,000 spread out over those times. And I’m telling
you, you might say no they’re not going
to want to do that, but absolutely is the
case that they do. And so what did I
do with this woman? So we actually got
tipped off, because we got a call from a third
party mortgage buyer, right? And they said, oh so-and-so
wants to sell her Note to us. And so we wanted to verify
that you are paying on the Note and you’re the current owners. And so we’re going to assume
this Note and you’ll pay us. And Clayton said, uh-uh,
I don’t want another Note, I want to own it. So he called the
owner and he said, hey lady I saw you’re
trying to sell the Note, I guess you need
some extra cash. How much are you trying
to sell the Note for? And she said oh about $7,000 and
you said I will buy that Note. I will send you $7,000 tomorrow. It will be closed by
the end of the week. This money will be
in your bank account. Tell this other Note investor
to pound sand, right? We owed like $15,000. We owed $12,000. Oh, $12,000, right. And so we got a discount on
that Note of about $5,000, and then we got rid of her. She was kind of a
pain in my butt. She liked to call me a lot. And so I was super happy. I mean she was a nice
lady, but she definitely called me all the time. And sent me text messages
about little tiny things. Yeah I was super happy to
be done with that Note. Be done with that
monthly payment, and by that Note at a discount. And then not have to make
that payment any more. And now, look, we bought that
property for a discounted price. If you total what we paid for
her down, plus what we paid for her to pay off the Note,
plus the year in between of payments we got
it for less money. And now the cash flow
is completely ours. We don’t have to deal
with her anymore. And so how that all got
wrapped up was I simply said, I’ll pay for it right now. I’ll call the title company. I’m going to wire
over these funds. You just need to confirm with
them that the mortgage is now complete. And what’s that
called when you’re done paying a mortgage off? Satisfied? Satisfied. That the mortgage
is now satisfied, I think so. They need to verify with you. She did. She called the title company. I wired the money. She considered the
mortgage satisfied. They closed the mortgage. We received the deed in
the mail a few weeks later from the County. Done. Done. Done. And it was a pretty– Try doing that with Wells Fargo. It’s not going to happen. I mean, that’s what’s known
as like a short sale, mostly. Then your credit is
going to get hit. That’s not going to happen,
and it’s in reverse order. So you can’t do this with
the traditional bank. That’s why seller financing
is such a powerful strategy, because there are human
beings in this negotiation. And nine times
out of ten they’re going to be willing to take
that lump sum payment instead of waiting another ten years for
you to get your act together. As long as she didn’t have
like a structured Note still with a formal bank. She could afford to do it. She just wanted to
take that money out. And both processes were pretty
cheap with the escrow company. Do you remember how much
we paid for those two? It was like– A few hundred bucks, yeah. Yeah, it wasn’t thousands. So a couple of things,
three key things I want to talk about
with seller financing. Number one, I kind of mentioned
that the normal traditional route, right? You agree with the seller
for maybe 5, 7, 10, years. You’re going to pay them know
$5,000 down, maybe $2,000 down and you’re going to pay like
5% interest for 5 to 10 years, right? That’s the traditional
normal sort of mortgage. It’s going to be amortized. The title company will set
it up for you, you can then, you can get coupons. You can structure it that
way to send out, that’s fine. Second way is interest only. So you may even want to do more
of an interest only option. So what that means
is you can offer that person less for the
purchase of the property. And show the seller
that he’s going to get actually more overtime. Because now they’re going
to make more on that. Then you can actually
structure those from like 5 to 12
years with a similar– like a smaller down payment. So maybe $1,000 down,
but you’re going to pay them a little bit higher,
because it’s interest only. So you could do that as well. Those are a couple of options. Another option though,
another monkey in this– monkey in this
machine, I guess, is what you mentioned,
which is the mortgage. What if they still owed
debt on the property? And that’s important, because
you can still use many of these same options, right? The traditional
route or the interest only, but structure it as a
contract for the deed where the deed is held in escrow. Because then that won’t trigger
that due-on-sale clause. Because they’re not
selling the house. Obviously they’re still paying
a mortgage, but if you structure it as a contract for the deed. But where the deed is still held
in escrow until it’s paid off, for that underlying loan. So that basically is just
called subject to the existing mortgage. So it’s kept– so she’s
still paying her mortgage. You’re paying her, she’s
then paying her mortgage. So it’s kind of like a double
dip there if that makes sense. It’s a little high level. I don’t want to get too
in the weeds with it. But you may find
a deal where she’s like, well you know I wanted
$100 I still owe $30 on it. Great, well would you
consider selling the house with seller financing? You’ll still be able to
cover your existing mortgage, and you’re going to actually
make some more money. I’m going to give
you a down payment. I’ll buy the house from you
subject to your mortgage. You can move, you
can go to Kansas, wherever you want to move. I’m buying the house,
but your mortgage will still be paid on time. I’m just going to be
paying you on top of it. Basically almost like
subletting a house, you know? Right, now most
mortgages have a clause saying that you can’t do this. Like if we were to do it for
the house we live in now, and the lender found
out they could then make the mortgage due in full. So you have to
read your Mortgage. If you have an investment loan
that might not be the case. Investment loans are a
little bit more lenient. Well that’s why I’m saying
you could structure it as a contract for the Deed. Not actually for
the Deed itself, but a contract for the Deed. And then the Deed
is held in escrow. That will not trigger
the due-on-sale clause. So, therefore, it’s still held
by Mary you’re just paying her. You have a contract for the Deed
so it’s still held in escrow. Yeah and a lot of
times you may come up with these terms
and not exactly know how to structure the
contract and that’s where the escrow
person comes in. So you can agree, say, OK– I don’t know why we’re
using the term Mary, but let’s pretend that Mary
is our distressed seller. OK, Mary I’m going
to give you $5,000. I’m going to pay you
this Note for 10 years. Let’s have– and
so you don’t have to worry too much
about the terms. The escrow person will
walk you through it. If they’re experienced
enough to know this. So I think why we
wanted to do this was, because this is not
something that you’re going to get from a turnkey provider. This is something you’ll
find, because you’re out there looking for deals. And or just keeping
your ear to the ground, and you hear about someone who
wants to sell this property, maybe even at a REIA meeting. And you’re like, oh, I know
exactly how I can get this. This is a way to just add bit
by bit to your overall strategy. But I think the real trick there
is to sell it to the seller, right? Right, and I was just
about to say that. A lot of investors might
not be educated on this. I mean if you’re
watching this, right now and this is the first
time you’ve heard of it. And you’re a savvy investor. Maybe you even own a few
rental properties yourself. You’re thinking about it. You’ve been listening
to all the podcast. You’ve been watching the videos. So you’re actually
pretty way more savvy than some investors are
who own five properties that they inherited. And they’ve just been
holding onto them. They might not even know
what seller financing is. You need to educate
them, and tell them about the capital gains hit
that they’re going to incur by selling that property. If they sell it fully
and they’re done with it immediately they’re
going to then have to pay a huge chunk of
change to their taxes as a profit on that property. Even in my real
estate book, which is behind me, when I got
my real estate license. There was one column about
this in the book teaching realtors about it. So real estate
professionals don’t know. And everyone in the room was
like why would anyone do that. And I was like,
oh I can give you a few reasons why
you could do it, because it works super
awesome for both parties. But no one understood
why, because they were all sort of traditional–
we only represent people to buy homes they live in. Build it in as part of your– Business model– If you’re a wholesaler
maybe build it in as part of your overall
pitch to a motivated seller who wants to sell. Don’t just go the
traditional route, but talk to them about
seller financing. And you know putting
down $1,000 or $2,000. They may come back and say,
hey I want more money down. This is a great
deal you’re going to have to put down
more skin in the game. We talked about skin in the
game here on the podcast. You may have to put $5,000 down,
you may have to put $10,000. But if you’re getting a $60,000
house, you have bad credit, you don’t have
borrowing potential, you can’t find properties
and this person’s willing to get you started. I mean, a lot of people
have started this way. Some of their first
rental properties were seller finance deals
that got them started. Which is a great way to kick
start your rental journey. So anything else we want
to talk about with this or did we cover most– I think we did. I the goal was
just so that people understood that this
was one extra way to add to their portfolio. And you know Clayton and I
were discussing this today. And most of the things we buy
we like to pay cash for them. But we’ve had some good
experience with it. So we were talking
about it over breakfast and I was like, I would
like to have a few more of those that would be nice. Yeah and too it’s also
good for the seller in a number of different ways. We talked about the tax
reasons, but what happens if you walk away, right? What happens if you can’t– you’re just a just dumb
investor and you can’t get it rented or et cetera. And you’re like, oh what am I
going to do with this property. You just flake. You just flake. Well guess what? That landlord that you bought
it from gets it back, right? They don’t have to go
through a foreclosure. Probably they get
the property back. Now it’s back in their hands,
and they can get it back up and running and cash
flowed or resell it. They can resell it. Plus they have your cash that– They have you’re downpayment– Going to get back, right. Yeah, your $10,000 that
you already paid them. You know what if you flake? They keep that and
then they could just put it back out there
on the open market or go to another investor
and get another $10,000 down and rinse and repeat. I definitely talked to
investors that have done that. Where they’ve tried to
sell it seller financing and for whatever
reason the buyer just kind of flaked on them. And then they’ve kept
their down payment, and they’re now getting
a second down payment. So in some ways– not that you want that
to happen, but really there’s not a lot of
downside in this at all. But what if the seller– if you do a subject
to and the seller just decides to keep your
money and not give that to the mortgage company. And the mortgage company
comes after you the new owner. Do you know? I actually– Say that again. So wait a minute, because
you, Mary, are still responsible for
paying your mortgage. What if Mary doesn’t? And then the original
lender wants the house back? Is there a risk there to you
as the new subject to buyer? Well for sure, but you
can then take over payment of the mortgage with the bank. And so if for some
reason that owner dies or who knows what happens,
you then can go to the bank– Because you’re on the deed– Because you’re, right. You have a contract for the
deed in lieu of foreclosure. So then you can
structure it that way. So it’s a little
more complicated, but you have like a
fiduciary responsibility. You can go to the
bank and say, hey look I’ve been actually
paying for this. Can I assume– And– This mortgage– And I have the proper paperwork. And the bank’s not going
to say, no get out of here we don’t want to be repaid. They’re going to say, OK, as
long as you keep paying us. Thank you for letting us know. Because real estate is an
incredibly risky business for a bank. Yeah, so there you go. So there you go that’s a little
overview of seller financing. I don’t want to get to
in the weeds with it, but if you have any
questions, please post them in the comment thread below, if
you’re watching this on video. And please share this
with your friends, your loved ones, anyone
else who wants to get started in real
estate investing. Hopefully we learned
you something today. That’s right. As always, please
subscribe become a subscriber of the show. We publish the show
multiple times a week. We have so many great
shows in the archive. So please go back, and check
all of those out as well. So until then, until
we see you next time. Go out there, take action and
become a real estate investor. Much love to you all. Bye bye.

Seller Financing for Real Estate Investors

94 thoughts on “Seller Financing for Real Estate Investors

  • June 16, 2017 at 4:08 pm
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    Thanks to both of you guys for your videos. This one was a light hope for me coz i have 25k only & wish to start right now. how & where do we find those sellers?

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  • June 16, 2017 at 4:57 pm
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    Would this be the same as a land contract?

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  • June 16, 2017 at 8:28 pm
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    got a lot to learn

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  • June 16, 2017 at 10:33 pm
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    this is good information, i've moved almost exclusively to seller financing after the first one I did and saw how amazing it was.

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  • June 17, 2017 at 2:55 am
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    Thank you for another great video! I defenately gonna consider a Seller Financing as one of the strategy to obtain the property. I have one question : Does any Title Company could help me with the process or there are only some of them actually specialize in a Seller Financing and working with the investors or something like that? Thank you!

    Reply
  • June 18, 2017 at 7:09 am
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    Still confused… But good information though. TQ.

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  • June 18, 2017 at 4:01 pm
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    HELLO I REAALY ENJOY YOUR VIDEOS ! ONE QUESTION IS LAS VEGAS NEVADA A GOOD ESTATE TO INVEST IN APARTMENT REAL ESTATE?

    Reply
  • June 18, 2017 at 11:15 pm
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    Thank you.

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  • June 19, 2017 at 11:58 am
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    Another informative video by you guys! I've been looking to try this on my next rental property. 👍

    Reply
  • June 21, 2017 at 9:21 am
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    Hello I'm a new subscriber and I'm learning so much from your channel. I want to start investing in properties but my mortgage is in the way. Any suggestions? Thank you!

    Reply
  • June 22, 2017 at 11:47 am
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    Great detail. I have heard of list source and other mediums to target specific owners. how do you go about finding seller finances deals?

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  • June 29, 2017 at 1:40 pm
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    Hi, can you tell me the name of Natali's website?

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  • July 8, 2017 at 3:24 am
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    Question???? Does a seller financing have an impact on your Credit??? Or show up as debt which causes your debt to income ratio to go up? I know you are not financial advisor.

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  • July 13, 2017 at 5:58 pm
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    Great info guys!!

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  • July 14, 2017 at 6:08 pm
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    I am a little confused.(and I havent finished the video yet) You mentioned several times seller financing for 5 to 7 years.

    Are you selling these properties before that note comes due or holding them for monthly cash flow?

    If you are holding them you'd need much longer than 7 years no?
    Or a more traditional loan in 7 years to pay off the note to the seller?

    Reply
  • July 23, 2017 at 7:33 am
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    Great information, youre about to make me and my wife really happy!

    Reply
  • July 26, 2017 at 3:01 pm
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    Any tips on helping a guy who purchased a contract for deed and has fallen behind on payments. He's wanting to keep the property but is that something you'd steer away from because on tax record the property is still underthe original sellers name, yet has the note of contract for deed being done? Hope that's clear.

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  • July 26, 2017 at 3:01 pm
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    Really helpful info by the way! Thank you!!

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  • August 2, 2017 at 2:31 pm
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    If the seller defaults on the loan, then you as the buyer have to contact their mortgage company to make payments. Wont that trigger the "due at close" clause?

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  • August 11, 2017 at 4:12 am
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    I love how straight forward you both are without a lot of off topic talk…great show!!! Thanks!

    Reply
  • August 14, 2017 at 3:51 am
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    great video! gave me some new strategies for a property i'm looking at.

    question: Assuming the seller agrees to use seller financing. Once that deal is in place, can I the buyer immediately apply for a HELOC, since technically i will be the new owner?

    Reply
  • September 4, 2017 at 8:01 am
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    How you handle the tenants who are breaking things up constantly or make huge damage to your property. I think once in a while you will get those kinda tenants.

    Reply
  • September 12, 2017 at 10:35 pm
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    Talking to much. Get to the point.

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  • September 21, 2017 at 1:58 am
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    I owner finance my houses for 30 years instead of rent.

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  • September 21, 2017 at 4:03 pm
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    Are any of the properties available through Morris Invest seller financed? Or is this topic generally more applicable to those doing it themselves, not necessarily dealing with a turnkey company such as yourselves?

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  • September 26, 2017 at 2:48 am
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    I have a good story. The house I have in TN, I thought I would not be able to manage it. So after 4 yrs of it sitting I decided I would sell it. I put it on craiglist and got several lowball offers and even a low ball seller finance offer. So I said ok, Ill just sell it via auction. Long story short the house sold for 3,800. yes three thousand eight hundred. I was floored. Felt like my gut was kicked in. However, guess what? The buyer couldn't come up with the funds in 30 days! Hallelujiah. I then rehabbed it and its rented out.

    Reply
  • October 6, 2017 at 7:36 am
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    Hi I'm getting confused a bit. BiggerPockets call "cash flow" a sum that is left after taxes, repairs, property manager, etc – the profit. What is cash flow for you? at 16:05 Natalie is saying you're cashflowing 150 a month, but then she says you can pay the taxes, property manager etc. Am I over analysing?

    Reply
  • October 10, 2017 at 3:02 am
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    As with your other videos, you make it simple to understand and you give details. Thank you

    Reply
  • October 11, 2017 at 4:12 pm
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    Awesome video!! Well done!!

    Reply
  • October 29, 2017 at 6:38 am
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    LOL! Good humor…. and I like that attitude shirt

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  • October 29, 2017 at 6:41 am
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    What happens if they pulled the equity out of the house before doing seller finance …would the equity still be there?

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  • October 29, 2017 at 6:55 am
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    What happens if that person pass away before the contract close?

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  • October 31, 2017 at 8:02 pm
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    Hi, GREAT video. I have a situation currently, the owner is asking 240k for property but says seller financing is available and wants 100k down and refinace after 3 years, but terms are negotiable. We need about 20k in repairs to fix it up and plan to do a master lease to college kids after its fixed up. How would you to go about this? Like interest only? So you pay him? Or do a subject too/seller finace and pay him the mortgage payment only? Or mortgage payment plus some cash, and i would cashflow the rest? I just want to know your take and the step process. This would be my first seller finace deal? Thanks heaps for your knowledge and Sharing.

    Reply
  • November 1, 2017 at 10:03 am
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    With seller financing, how is the seller avoiding capital gains taxes through this process verses selling the property traditionally?

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  • November 15, 2017 at 5:58 pm
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    Awesome video. Have a potential property I might purchase via seller financing and this information is so helpful. Y'all just gained a subscriber!

    Reply
  • December 12, 2017 at 5:37 pm
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    How do you avoid wraparound mortgage dealing with seller financing?

    Reply
  • February 18, 2018 at 3:46 pm
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    Shout out from Spokane Wa

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  • April 5, 2018 at 7:09 pm
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    Did your wife punch you in the left eye boss? Lol

    Reply
  • April 8, 2018 at 5:57 pm
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    I always learn lots from you guys. Thank you! I need to learn more about the deed in escrow part.

    Reply
  • April 17, 2018 at 12:46 pm
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    I’ve been the seller on three seller financed properties, each on ten year notes. I’m now 12 years into it and one out of the three has performed. The only way to get the property back is to initiate a foreclosure. I’ve been trying to purchase a house since the summer of 2017 and underwriters require some sort of documentation that those payments have been made, because one of my properties is owned by another investor in which he has tenants, he pays my mortgage company directly. This was the worst decision I ever made, to let him pay directly. Yes he’s been perfect on payments but to that underwriter, I have a $900 a month liability which destroys my debt to income ratio.

    Always use an escrow company to create a paper trail for underwriters.

    Reply
  • April 19, 2018 at 6:28 pm
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    Great video, question. Say the seller is older and does a owner finance, "and they pass away before the note matures" the capital gains tax is not transferable to the person or persons who inherits that property? Tax Gets wiped away kind of like a 1031 exchange in a similar process

    Reply
  • April 26, 2018 at 1:50 pm
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    Mortgage service provider will make the payments as an uninterested third party making sure to debit an acct and make the payment. I would never pay the mortgage holder

    Reply
  • May 6, 2018 at 2:18 am
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    Hey New Investor here! Can you give some examples of how investor can work together with other investors for profit?

    Reply
  • May 8, 2018 at 5:37 am
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    Hi ; is there a way to message you? Me and my wife are wanting to do this too but would like some advise as we have a friend who wants to sell to us. Please let me know, thanks.

    Reply
  • May 13, 2018 at 5:05 pm
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    Seller Financing is buying the promissory Note? I would need to take it to escrow? Can I flip the note or can I fix & flip the property and sell it? Basically I would like seller finance to fix & flip the property.

    Reply
  • May 20, 2018 at 2:47 am
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    Good video thanks

    Reply
  • May 21, 2018 at 3:39 pm
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    This was of great value!

    Reply
  • May 26, 2018 at 6:50 pm
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    What happens if the seller doesn’t pay the bank? Example, what if you are paying Jane the Bank, but Jane doesn’t pay the big bank.

    Do you pay the pay mortgage bank directly

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  • June 3, 2018 at 6:52 pm
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    HOw to find escrow people to help structure this owner financing subject to mortgage please. Thank you

    Reply
  • July 2, 2018 at 4:12 am
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    What are the best ways going about finding seller financing opportunities. Relator.com? local real estate companies? Just looking around?

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  • July 7, 2018 at 1:51 am
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    How would you go about doing this.. Just meet up at the title company/lawyer….and who pays the closing..or are there closing costs to just get the deal done?

    Reply
  • July 16, 2018 at 6:16 pm
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    What do I do if I bring up seller financing and the property needs reno. Who pays reno. Can I do with no money down?

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  • July 24, 2018 at 2:49 am
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    I've bought my first three properties via Seller Financing/ Contract for Deed (CFD), and it's awesome! However… It's my understanding that the property has to be owned free and clear to sell CFD… Otherwise, if the lien holder (usually a bank) finds out they can foreclose on the property… Really risky when a mortgage is still held by the seller. That's my understanding anyhow.

    Reply
  • July 24, 2018 at 2:50 am
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    How do you feel about vacation rentals (short term weekends and weekly) vs residential rentals (long term year long). I have an opportunity to buy a vacation rental in a mountain lake town, Owner financing, 5k down, she’s asking 50k. I have the cash to purchase. Property should rent year round even tho would slow certain seasons. This is my first rental should I stay away from this? Should I go with a residential long term rental 1yr lease? You guys are great!!

    Reply
  • August 5, 2018 at 4:03 pm
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    Vvg

    Reply
  • August 5, 2018 at 4:54 pm
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    Hi.. I would love to advertise in your show. I buy houses… Speak in spanish .available…

    Reply
  • August 5, 2018 at 4:57 pm
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    Thatsd a subject to

    Reply
  • August 21, 2018 at 2:36 pm
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    Do you market and find someone to pay the $5000 or does that come out of your pocket?

    Reply
  • August 30, 2018 at 7:27 pm
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    When doing seller financing is there any way to protect your property from damages from the buyer? I've seen some horror stories from people buying a house on contract that when they were about to lose the house they just completely gutted/destroyed it and the seller was basically screwed. Sure there was probably several thousand $ down, but some of the stories I've heard that didn't cover the damages. I mean, can you put it in the contract that the two of you are to do a walk through prior, write down any damages at that time, and have them sign it, and then have them sign another paper that says that they will be held accountable for any further damages, if the property goes back to the seller? This is really the only thing that terrifies me with this whole situation of selling on contract.

    Reply
  • September 2, 2018 at 7:09 am
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    I am a total beginner at investing. I've never rented a property, but I do have $2,000 in cash I could use as a downpayment. What are the forums and paperwork needed to complete a Seller Finance deal? Also, when is the best time to start an LLC for Real Estate investing or is this something I should worry about once I experience cash flow? Thanks great content!

    Reply
  • October 11, 2018 at 2:00 am
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    I thought if you lived in the house for more than 2 years they wouldn't have to pay capital gain tax?

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  • November 2, 2018 at 2:14 am
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    Blockchain is going to make this all so easy

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  • November 11, 2018 at 5:06 pm
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    Skip to minute 5 for seller financing.

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  • November 18, 2018 at 10:10 pm
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    What if the seller has an unpaid mortgage balance? Can you still implement this strategy?

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  • November 20, 2018 at 9:32 pm
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    One important aspect of real estate investment is determining the highest and best use for a piece of property. This is reaching an understanding of what exactly an investment is worth. You know, people already know you’re the highest and best friend possible! Have a great day😊

    Bert Levi from San Diego

    Reply
  • November 21, 2018 at 6:43 pm
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    Who and where does all the paperwork/contracts get done on a seller finance deal?

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  • November 29, 2018 at 8:30 pm
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    Sellers note (mortgage) is assumable??

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  • November 29, 2018 at 8:38 pm
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    Where? Who? are these "note investors"? If not banks…

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  • November 29, 2018 at 8:40 pm
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    "Structure Note with a formal bank" this is a BIG point!!! Needs to be another video.

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  • November 29, 2018 at 9:03 pm
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    Buyer has to have a "lean" on the property to have a "right" to the property IF the seller/Mary doesn't make payents

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  • December 4, 2018 at 5:24 am
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    What is the owner's actual/mathematical advantage of taking installments from you (income) versus the lump sale (gains)? I assume this depends on income brackets. *Please assume the gains are long terms when you answer. Thanks!

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  • December 18, 2018 at 2:13 am
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    Do you need a real estate license for all of this?

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  • December 20, 2018 at 6:10 am
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    So I understand seller financing, you pay the original owner, and they pay their mortgage, and you own it after doing proper paper work. My question is what happens if the original owner does not pay the mortgage?

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  • January 21, 2019 at 10:52 am
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    Hi, I'm located in the state of Georgia. I am trying to start investing properties. I wanted to buy at least 2 houses a year cash and resale them using owners finance. I was reading about a Dodd- Frank law , but I was confused as in how that worked. Is there a limit on the amount of houses you can owner finance as the seller? I was wondering if it would be better to owner finance as a buyer instead of paying cash up front for homes.

    Reply
  • January 23, 2019 at 7:32 pm
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    Does the house have to be free and clear from the bank?

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  • February 4, 2019 at 4:48 pm
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    Let him talk woman!!!

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  • February 20, 2019 at 3:51 am
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    The wife is very convincing and articulate, which helped me to finish my 30 minutes exercise routine while watching this video! Thank you!

    Reply
  • February 20, 2019 at 7:19 pm
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    Funny, I was just about to fold clothes and all of sudden your video starting playing, no lie! I am trying to get my 2nd wholesale deal but wanted to learn more about Seller Financing, I am so doing this, thanks for the information so informative.

    Reply
  • March 1, 2019 at 3:37 pm
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    I'm still trying to understand everything, so do you have to apply for a mortgage still? Or is there some sort of other credit check/ monthly income requirement?

    Reply
  • March 4, 2019 at 7:18 pm
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    Is this also considered a land note? Or is it something different

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  • March 7, 2019 at 7:07 pm
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    Hey guys question on seller finance. can you sell the property and payoff the homeowner? if a year later the house appraised for more money and i want to sell can i do that?

    Reply
  • March 8, 2019 at 9:33 am
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    Very important question, how do I find a women like Natalie?.. asking for a friend..😳

    Reply
  • March 9, 2019 at 6:56 pm
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    Skip to 5:08 for Seller Financing

    Reply
  • March 13, 2019 at 3:48 pm
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    I stay in Mississippi, connect me..

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  • March 15, 2019 at 2:26 am
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    A $150 cash flow, before taxes, insurance, and management. I get that it's an example but that is bad advise. One major expense and the property has negative cash flow. Then go back after 2 years and offer half of your contract? Dude. Towing the line between bad advise and unethical. I like your content, I think, but you influence people and should take a little caution when steering people towards dangerous deals

    Reply
  • March 15, 2019 at 7:24 am
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    Seller Financed purchase worked great for me ! The more ways this can be successfull shared by you is a priceless Gift . Thank you Both so much !

    Reply
  • March 30, 2019 at 10:01 am
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    Show starts at 5:05 for anyone who cares

    Reply
  • June 5, 2019 at 9:03 pm
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    Great video.

    Reply
  • June 8, 2019 at 5:39 pm
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    30 min in… should edit all that out…false info

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  • June 20, 2019 at 9:12 pm
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    Is it safe to do loan assumptions in Texas? I've heard that it may not be doable.

    Reply
  • June 20, 2019 at 11:20 pm
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    5 years later the mortgage is paid off ? Lol

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  • July 14, 2019 at 6:35 pm
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    Is it possible to do partial owner financing? The appraiser came in about $15k less, it's 2 weeks to closing and I want to be the 2nd mortgage, who do I talk to about holding a 2nd mortgage? Do I have to ask the lender something? If so what? Or should I do a private unsecured loan?

    Reply
  • July 23, 2019 at 10:14 pm
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    Great info thanks

    Reply

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