Streamline Your Finance Operations with a Real Estate Invoice for Finance

Real estate invoice for Finance

hey everyone this is Stan ginin with real estate skills in this video we're going to be talking about seller financing or how to invest with creative financing if you like what you hear in this video hit the like button subscribe comment down below what else you want to hear and make sure you click the link in the description to get our free resource and tell us what else you want to learn about so in this video we're going to be talking about what is seller financing how to use it how it benefits you what are some of the disadvantages and advantages of it and how to apply it to your real estate business today so first let's talk about what is seller financing seller financing is anytime you make some sort of deal with a seller about financing the home you're buying from them that could be anything from them giving you a mortgage to just buy the home without having to pay them cash at closing or they give you a portion of that so you can renovate the home and then sell it and pay them back or they could just possibly let you take over the mortgage and make those mortgage payments and not have to bring your own money to buy that house so here's how seller financing Works in real estate let's say you find a house for sale from someone that's owned their house for a long time the house is worth 200 or maybe in today's society $300,000 for a starter home a $300,000 home with no mortgage on it you guys ink a deal to buy the property for 300 Grand there's no mortgage on the home and the seller says hey maybe I want to get some more money out of this would you like for me to basically provide a mortgage for you no different than a bank at a set interest rate and then you can make me monthly payments or pay me at the end when you sell the house and I get all my money plus some extra interest so it's a great way for a seller to delay paying taxes because they don't actually get the money until the house is sold and the money is repaid or they can charge interest to you by borrowing from them the purchase price that you two have agreed on and then you pay them some extra interest over the time that you're owning the home renovating it selling it so they could possibly make another $155,000 on a $300,000 purchase if it takes you a year to buy renovate and sell a home there's a lot of benefits to you and the seller by doing this process with them so to summarize how seller financing works it is the process of you putting a home under contract with a seller and then basically creating a mortgage for you no different than a bank where you're borrowing the money from them but only on paper there's no money exchanging hands unless you agree to maybe give them some sort of down payment and the rest of the money would be paid when you finish the home refinance it or sell it they get paid back during that process so just like we talked about before here's how you can structure a seller finance deal again let's say you found a home for sale for $300,000 the seller has no mortgage on it so it's free and clear there's no leans on it so you agree with the seller to buy the home for $300,000 and maybe the seller wants a $20,000 ,000 down payment so he can go and pay some bills with it so he creates a mortgage with you usually with a title and closing company or a closing attorney and then it gets recorded at the closing table as lean against that property so now you own this home with $220,000 down and there's a mortgage against this property on the terms that you negotiated with the seller that could be a 5% interest rate when the property is closed that could be a month payment of 5% that could be no payments until the end it's up to you and the seller to negotiate a creative deal that works for everyone remember the point of seller financing is to make sure everybody wins at the end so maybe a seller wants $315,000 for the home that they're selling to you but you could only pay $ 300,000 but if you borrow money to renovate that home and then sell it later you're going to pay $155,000 in interest so you're telling the seller Mr or Miss seller how about I pay you that money instead of my investor and then you walk away with $315,000 just like you want so after you've negotiated these terms with a potential seller you take your terms and you can tell them to a title an escrow company or a closing attorney and typically they will help create a mortgage that will be recorded at closing so seller financing is really a good strategy to allow you to buy a home with little to no money out of pocket and help the seller meet their goals whether it's delaying taxes or ending up with more money in their pocket so let's talk about some of the advantages for the seller when doing a seller finance deal number one they don't have to list with a real estate agent and pay all the commissions and costs that come with listing it with a real estate agent they can close it directly with you and typically when a seller sells a home with you they're only paying a couple of hundred to maybe $1,500 is the most I've seen in some markets rather than paying thousands of dollars for an agent's Commission that's one of the best savings for them when doing a seller finance deal another great advantage to the seller for doing a seller finance deal with you is to push the tax bill down the road maybe they just inherited a house from a family member and by selling it right away to someone or with an agent on the MLS they're going to immediately get a huge tax bill by doing a seller finance deal they won't get the money for usually 6 to n months if you're going to renovate and sell it which means they can tax plan and knock out some of those taxes giving them plenty of time to do so another big advantage to the seller by doing a seller finance deal by allowing you to take on a mortgage without bringing the money from A lender you can just buy the property as is close really quickly whereas you going to get a loan can take weeks or even up to 45 days or 60 days I've seen this way by doing a seller finance deal you can close probably as quickly as a week in some areas or two weeks in most areas allowing them to knock off any sort of utility bills maintenance bills right away and allow you to take possession of the property and start either renovating it maybe wholesaling it or whatever else you're going to do with that property so those are four great advantages for sellers when doing a seller finance dealing with you allowing them to get all of these benefits and you closing on the property really quickly so now let's talk about some of the seller financing benefits for you as the buyer you're able to get your first deal without having a lot of money out of pocket and if you don't have a lot of money out of pocket this is your opportunity to get into your first deal without having to qualify for credit or loans or any of the other stuff this is a great option for a lot of people starting out in real estate investing and looking for homes that have a lot of equity allowing the seller to finance the deal for you so you can get your first deal done and just like advantages for the seller you as a buyer get to pay a lot lower closing cost instead of going to get a traditional or a hard money loan which come with a lot of fees and sometimes penalties for selling the property again too quickly you're going to pay much lower closing cost typically if there's no loan involved your closing cost will be minimal about 1% of the purchase price that way you can save thousands of dollars that other lenders charge by doing the loan with a professional lending company or hard money lending company another great Advantage for you as the buyer is your terms on the loan that the seller is going to give you can be as creative as you can make make them you can have no monthly payments you can have some monthly payments you could have no deposit small deposits it's really as creative as you and the seller can get together to get to a winning formula a lot of times I've seen success with seller financing when the seller and I could not come to terms on a purchase price we were so close but far apart this way by paying the interest to the seller instead of a bank or an investor we can get them to exactly the number they need without having a sacrifice on the purchase price and finally this is a great advantage to those that don't have the best credit today it's a good opportunity for you to get into your first real EST estate deal without having to worry about having great credit and qualifying for a loan with some big lender or hard money lending company and the terms can be totally flexible to what you and a potential seller come to an agreement on whereas your credit strictly determines what the interest rate and the amount of money a professional lending company will give you so again if this is your first deal you don't have the best credit look for homes with high equity and you can make a great deal with a seller and get into your first real estate property now let's talk about some of the disadvantages of seller financing in real estate number one there's a lot less regulations when you're doing a seller finance deal with a potential seller unlike getting a traditional loan no one's double-checking your numbers to see if you're overpaying or you're underpaying or if you're actually doing a good job on your due diligence when you're finding a property to buy a lot of times when you get a traditional loan the lenders require you do certain inspections to make sure you're not getting yourself into trouble when doing a seller finance deal these are not things that are required so you may choose to overlook them to get a potential deal done also another disadvantage of doing seller financing is a lot of times you're going to end up paying more interest and having higher down payments because the seller wants to make sure you're actually going to perform so if you don't do a great job negotiating a seller finance deal it might actually end up costing you more money whereas a traditional loan or a hard money loan may actually save you money in some situations and finally maybe one of the scariest things you're going to have to overcome when dealing with a seller is the fact that you might give them no down payment or a small down payment start renovating a home doing a lot of damage to it and just walking away and they're going to be stuck with a home that's worth less than what they tried to sell to you so you need to make sure that you have a legal professional that helps guide you through this process and you know what you're getting into and do the proper inspections before doing a seller finance deal so now let's talk about four things that you as a buyer should know before doing a seller finance deal number one you need to make sure that you actually bring up the seller financing option most sellers don't know about it or won't think to offer it so you have to understand how seller financing Works having a legal professional on your team that can walk you through a contract and walk you through that process and bringing it up in a professional way to a seller so they feel comfortable doing that deal with you and you need to be ready to sell yourself to the seller it's a very scary option for a seller to give you a house without getting all the money or just some of the money so you need to sell yourself as a confident professional real estate investor who's going to do right by them and they're going to get all their money at the end just as promised next you usually should not expect getting much better interest rates and terms than a regular Bank a lot of times sellers will agree to sell or financing for you but they will require a substantial down payment and they may require you still make those monthly payments and almost always the interest rate is not going to be better than getting a traditional loan finally the last thing we want to recommend if you're going to do a seller finance deal work with an escro or title company as well as a closing attorney to do a title and make sure that property has no leans on it usually the only time a seller finance deal works is if a property has no other leans because those leans supersede any seller financing that that person will do with you now let's talk about the three things a seller should know when thinking about doing a seller finance deal number one try to negotiate the shortest possible period for a seller finance deal you want to get your money as quickly as possible giving the buyer as little reason to delay paying it off and just pushing the bill down the road and make sure if you're doing a seller finance deal where someone's going to be renovating the property you're constantly asking for updates and making sure they're actually doing what they say secondly as a seller if you want to maximize how much you get from a property make sure you're actively pitching the seller financing option as part of the sale by pitching seller financing you can actually ask for more money than just on a normal sale you're allowing a buyer to come in and give you more money and not have to bring it from day one allowing them time to renovate it and rent it and refinance or renovate it and sell it so they don't have to bring all this money and they might be more willing to pay you more if they don't have to come out of pocket with all this money so make sure it's part of your pitch when you're selling a property finally if you consider doing seller financing on a property as a seller make sure you understand the tax consequences and talk to a legal professional and if you're doing a seller finance deal where the home is going to be financed for a good period of time let's say 2 three plus years you might want to seek out the services of a Servicing Company which will actually collect any payments for you and make sure the property is in good order those are the most important things to know whether you're a buyer or seller and thinking about doing a seller finance deal it's a great opportunity for new investors and it's a great opportunity for sellers to get more money if you like what you heard in this video check out the link in the description to get our free resource for more information like subscribe and comment below what else you want to hear Happy investing