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Real Estate Investors: How to Create Private Lenders Out of Thin Air - The Magic of Seller Financing

By Michel Lautensack

Republish: EasyPublish™ Published: 21Jun2009 Word count: 460 Viewed: 158 time(s) Get Free Content For Your Site

You will get folks to call you. These are the folks that really have deals because once they've called you and you develop this rapport process, you can then start to talk about seller financing.

Seller Financing

"Mr. Seller, your property is worth $100,000. What I'd like to propose is $70,000 in cash. Okay, you don't like that offer? My next offer is going to be $80,000 in cash and a $20,000 note where you take back $20,000."

Now you've simply created a $20,000 seller note. This is the private lending process. Have you not just created a $20,000 private lending note? Have you not just satisfied your 20- 25% equity in the real estate investment? Have you not just avoided having to put $20,000 out of your own money? This is the way you create great deals.

On top of that, assuming the deal closes, you would be paying this note for months, if not years. At some point, that seller will call you. Something will happen in their life. Their kid will go to college. They'll need to buy a new car. They're going to have a need for immediate cash.

They will call you and say, "Bill, I need some money right now. You owe me $15,000 on this note. If you give me $8,000 right now, we'll just call it done." Bam! You negotiate back and forth. You come up with the $8,000 yourself or through a private lender if need be and now you've just paid off a $20,000 note at $8,000 or $10,000. You've just created another $8,000 or $10,000 of equity in that property.

That is one of the great ways to really accelerate your business and create equity. Not only that, but you do not have to put out that $20,000 in equity and that allows you, if you have the $20,000, to use it in the next deal or whatever, but that's the way to really create wealth in this business.

Negotiating Good Deals

If you're going to be paying cash at retail prices with realtors, I think you're going to find it a difficult business, but if you're going to be doing it through this mechanism where sellers call you, you negotiate good deals, you can negotiate financing as part of your transactions and then you can go from there.

What's really interesting, if a seller calls you and there is no financing on a property, now you've got a homerun. Now you've got what you call a free and clear property. You have all kinds of options in terms of working with that seller.

You could just offer them maybe $5,000 or $10,000 and they would take back the entire rest of the balance in a note, a mortgage, and you've essentially created a complete financing package on that property without ever going to a bank or a hard moneylender.

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