Seller financing is a great option for buying properties from motivated sellers who own their property free and clear. In this video, I will explain the basics of seller financing, how it can help the seller sell their home, and how it can also help you as the buyer/investor buy their house with great terms.
If you want to have long term financing in place, but you can’t get approved for a mortgage or you don’t want to pay all of the fees and points associated with getting a regular mortgage then seller financing is a great option.
If interest rates are too high (like they are now) then seller financing is the perfect way to purchase a property with a lower interest rate than the prevailing rate. If mortgage rates are 7% and you can get a seller to agree to a lower amount like 3% then that is a plus for you as the investor.
And because you are negotiating based on terms and not price, you can create any agreement you want (as long as the seller will agree to it). I have seen situations where sellers are willing to sell their house with payments over 5 years or 8 years where you essentially get a zero interest rate mortgage. Remember the key thing is to negotiate on terms not price. This video explains how to do that. And when you are meeting sellers and talking about cash offers, being able to add seller financing to your toolbox will help you as an investor close more deals and buy more houses.
The key thing to understand is that the seller needs to own the property free and clear. They also need to be very motivated to sell. So how do you find these motivated sellers? You can use a tool like Propstream to search for owners of properties that are older and who have no mortgage (100% equity on the link above). For example, search for people who have owned their home for at least 10 years, who are older than 65, and who have no mortgage. You can do this by using the equity filter at the link above and putting in “100% equity” which essentially means no mortgage.
These older homeowners are much more likely to want to “downsize”. If their home is in great condition then they usually will not be willing to sell their house at a substantial discount. But they may be willing to do owner financing where essentially they are financing you instead of the bank or a private lender.
This works very well on houses that are in really good shape that are in turn key condition that could be turned into rentals or Airbnb’s. The reason for this is that if your payment to them is lower than market rents, then you will have a positive cash flow property. And since they are financing you, you will essentially be having the tenant pay your interest payments.
The seller may be stuck on their price, and not willing to negotiate a lower price. They may even have their property listed but it’s not selling (because the price is too high). So instead of negotiating with them on price, negotiate with them on terms.
Learn how to do this with different scenarios by watching the video.