Is Seller Financing a Good Idea?
You’ve heard of so many expert investors using owner financing on their properties, but is seller financing a good idea? Find out if this strategy is beneficial for you and how you can start doing it.
If you own a property, seller financing will add significantly to the profit when you sell.
You can do this! Before this article ends, you will have the concept and can put it to work anytime.
It’s very interesting to learn the many different ways sellers and buyers put together real estate transactions.
Want to learn how you can make big profits from deep discount real estate? Would you like to buy mortgage-free homes for pennies on the dollar? Or earn double-digit interest rates? Get started today with this FREE mini class!
Is Seller Financing a Good Idea? – It’s Not a New Idea
What is seller financing in real estate? First of all, if you are a newcomer to real estate, this business of seller financing is not new by any stretch of your imagination.
Today seller financing is used throughout the Midwest to sell small farms, large agricultural projects and office buildings.
Property owners make deals that include cash now and cash into the future. Many use a 10-year term although some are 20- and 30-year installment sales with balloon payments which all the parties agree to.
Businesses are sold every day with seller owner financing. Thousands of used cars and used boats are sold using seller financing. My point is this is legal, it’s ethical, and it helps all concerned.
For example, many sellers would prefer money over an extended period of time rather than a lump sum.
Installment sales of real estate have many special tax advantages. Before I go further, I’m not a CPA or a real estate broker or an attorney at law. So, I will avoid discussing legal and accounting matters.
Is Seller Financing a Good Idea? – Installment Payments
Today I’m answering your question, “Is seller financing a good idea?” My answer is, yes, it’s a good idea.
It’s so good that we spend considerable time and effort in our trainings to mention the advantages of seller financing, and we educate, explain and encourage students to consider seller financing.
America buys with installment payments. It doesn’t matter if it’s a new refrigerator or new living room furniture, cars or boats, or even education. Everything the public wants starts with satisfaction.
With installment sales, the public pays more, however they get what they want when they want it.
My point is the sooner you can get into a position of seller financing, the sooner you’ll be on the road to wealth and security.
Is Seller Financing a Good Idea? – Tax Liens and Tax Deeds
I’m Ted Thomas, and I’ve been involved in real estate for my whole life.
About 30-years ago, I discovered tax liens and tax deeds. When I saw the profit, by that I mean the margin between the low purchase price and the possible upside selling price, I never looked back.
Maybe life has thrown you a few curve balls. For some of you, it was sickness, for others, it was a divorce or maybe even a bankruptcy, or maybe you just made a bad decision. Seller financing is a way you can fix the mess, and build security into your future.
Is Seller Financing a Good Idea? – Tax Deed Auctions
In today’s lesson, I’m answering your question, is seller financing a good idea? Folks, I get it. Just follow along with me. I’ll guide you through a step-by-step process, and you’ll see why my answer is yes to the question, is seller financing a good idea?
First you must be a seller. That means somewhere along the line, you need to buy right. By that I mean buy at a low price like I do, at tax deed auctions. I’ve been involved with tax liens and tax deeds for over 30 years. I’ve built up my expertise, and I don’t just talk about it, I buy and sell.
The government has a process of tax deed auctions which involves over 5,000 auctions nationwide annually.
Is Seller Financing a Good Idea? – Delinquent Property Taxes
The government, starting with the state legislature, requires all property owners to pay property taxes.
The state legislature mandates that the local county levy tax and then collect property tax. If the property owner fails to pay property taxes, the county treasurer will confiscate the property. T
hey will seize the property and sell it at a public auction, which anyone can attend.
Is Seller Financing a Good Idea? – Buying Bargain Real Estate Mortgage-Free
My students buy these properties legally from county governments for 10 cents, 20 cents, and 30 cents on the dollar.
Additionally, the county treasurer is authorized by the state legislature to cancel, that is, wipe out the mortgage or trust deed loan. The treasurer will delete the mortgage from the official records.
It’s not unusual for a student investor to purchase a tax defaulted property valued at $50,000 or even $100,000 and receive a 60%, 70% or 80% discount from the tax assessed value.
These are used and abused homes, office buildings and small farms. Some have been abandoned.
Is Seller Financing a Good Idea? – A Seller Financing Example
Is seller financing a good idea? What are the benefits of seller financing? I’ll let you be the judge and the jury.
For example, a student investor buys for 10 cents on the dollar. Assume the value according to the tax assessor is $50,000. Since the student purchased for 10 cents on the dollar, the student has invested $5,000.
If there is no other bidder, the student now has the potential margin between the $5,000 purchase price and the $50,000 tax assessed price.
Is Seller Financing a Good Idea? – Buy Low and Sell Low
I spend hours teaching and encouraging student investors to buy low, for example, at $5,000, however, I also encourage selling low so that the resale will take place quickly.
I refer to this process of buy low, sell low as my Walmart Strategy. Of course, Target uses the same strategy and so does Costco.
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Is Seller Financing a Good Idea? – Seller Financing Terms
Typical owner financing terms are items like price, how much you will charge for the down payment, the interest rate, monthly installments, and the duration of the contract.
The contract will also include who’s paying the insurance and who pays property taxes on owner financing.
Who holds the deed in owner financing? To mitigate risk, the seller should hold the title.
Is Seller Financing a Good Idea? – Installment Sale
Let’s look at the deal. The purchase price is $5,000, and the assessed value is $50,000. For our example, let’s sell the property below market at $35,000 and request a $5,000 down payment.
All of our advertising will say for sale. Additionally, it will say seller financing and the word, “installment sale”.
For our example, let’s assume the payments are $350 a month, and we’ll accept a 10-year contract (120 months).
Is Seller Financing a Good Idea? – Doing the Math
Here’s the breakdown:
Tax assessed value of the property, $50,000
Auction purchase price at tax sale, $5,000
Potential profit margin, $45,000
Using buy low sell low strategy, sell for $35,000
Down payment, $5,000
Balance due is $30,000
Installment payments, $350 per month x 12 months = $4,200 annually
10 years of 120 payments = $42,000
Is Seller Financing a Good Idea? – Cash Flow vs Residual Income
Option 1 – Generate Cash Flow Fast
Sell the property for cash, $35,000.
Investment $5,000 at the auction
Total profit = $30,000
Option 2 – Create Residual Income Stream
Seller financing. Sell for $35,000
Down payment, $5000
Payments for 10 years at $350 a month (120 months x $350 a month = $42,000)
Add $5,000 down payment ($42,000 + $5,000 = $47,000)
Your initial investment, $5,000 ($47,000 – $5,000 = $42,000)
Is Seller Financing a Good Idea? – Seller Financing Profit
Your total profit using seller financing is $42,000! That’s $12,000 more in profit than you would have received if you had sold it outright.
Is seller financing a good idea for the buyer? You be the judge and the jury. A $5,000 investment using seller financing brings in $42,000 in profit over 10 years.
Almost anyone who understands seller financing understands the game. I have clients who use seller financing every transaction.
Is Seller Financing a Good Idea? – Risk
What are the risks of seller financing? You may be concerned about potential disadvantages of owner financing.
Buyers who seek out seller financing often have poor credit scores which makes them unable to get financing from banks or other traditional lenders.
You can mitigate your risk by charging a higher interest rate. Additionally, you can seek out the assistance of a title company or attorney when drawing up your seller financing contract.
This is an example. Ted Thomas is not a CPA, real estate broker, or an attorney.
Is Seller Financing a Good Idea? – Conclusion
We hope you enjoyed Ted’s lesson, “Is Seller Financing a Good Idea?”
Seller financing is used often for the sale of everything from cars to boats, even appliances and also real estate. There is nothing new or unusual about it.
Is seller financing a good idea? Absolutely! Not only does offering installment payments enable you to attract more buyers, but it also can dramatically increase your profits.
Through his more than 30 years of experience buying and selling real estate, Ted Thomas has perfected a system that has enormous profit potential, generates quick cash flow and creates residual streams of income.
Decades ago, Ted discovered tax defaulted property investing, and immediately recognized the earning potential.
At tax defaulted property auctions, real estate is sold mortgage-free for prices as low as 10, 20, or 30 cents on the dollar, leaving you with a huge profit margin to work with, which reduces risk and gives you the upper hand when you sell the property.
Since you purchased the property at a sizeable discount, you can quickly sell it by offering it at an attractive discount.
Imagine buying a property for 10 cents on the dollar and selling it for 50, 60, or 70 cents on the dollar. You could have buyers ringing your phone off the hook, and you’d still make a nice quick profit.
If you’d like to earn more, you could increase your pool of potential buyers and make even more in profit by offering seller financing. With seller financing, you profit from both the sale of the property and the financing, and you create residual income for years to come.
If you’d like to know more about how to make huge profits in bargain real estate, there’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Get started today at no cost with Ted’s FREE Master Class, that reveals the incredible opportunities available in tax defaulted real estate. The class is only about 1 hour of streaming video and contains life-changing information! You can’t afford to miss it!