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Why offer seller financing? Let me give you an example. Many years ago a certain real estate investor bought a rental property and then realized he no longer wanted to be a landlord. So, nine months later, he sold it for 15% more than he paid for it, without fixing or improving a thing. The easy terms are what sold it. He took only $1,000 down from the buyer and, years later, still receives a payment every month at 9% interest.
4 Reasons To Offer Seller Financing
1. You’ll get a higher price.
The example above shows that buyers will pay more for easy terms. Think about it from the buyer’s perspective. They bought a place for almost nothing (the $1,000 down payment) and they didn’t have get approved by a bank for the loan. If the buyer decides to make it a rental property, it’s even better. The renter will more than cover the monthly loan payments and the “extra amount” goes to the new owner as profit. They’ll do great even if they later sell it for less than they bought it for. The buyer loves the return they are getting, but if they need to, they can sell the contract for cash.
2. You’ll get a decent return on your money.
The 9% annual interest you’ll be getting is nice, but the true return was much higher, since the property was sold property for 15% more than the purchase price and you’ll get 9% on the entire balance. In fact, you’ll get a great return without the headaches of being a landlord. All you have to do is simply buy low for cash and sell high with terms. Of course, this is only if you are willing to tie up your assets.
3. You’ll sell faster.
In above example, the seller had a list of real estate investors and buyers who are always looking for a deal. He just called the buyer up, made the deal on the phone, and closed a week later. But anytime you expand the potential market for a property, you increase the odds of selling it faster – especially if you advertise “Buy Your Own Home for Only $1,000 Down.” Seller financing definitely invites more buyers to look at your real estate.
4. You can sell difficult properties.
With a property that’s difficult to finance conventionally, offering seller financing may be the only way you’ll get it sold, and at a fair price. Mobile homes on property can be difficult to finance, for example, so your market is limited. If you instead raise the price 10%, and offer easy terms, you can usually quickly find a family that will be very happy to own instead of rent.
The ways you can sell are limited by mortgages and other loans, of course. However, if you own the property free and clear, you can sell it any way you want. This is just one way to sell a difficult property with seller financing but there are many other ways – even if you owe on the property. There are ways to do this more safely,too. However, those topics are for another article.
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a blog, newsletter, and podcast for seniors and retirees, that teaches the art of real estate investing. His personal real estate investing goal, which will be chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in the next 6 years. Prior to that, Bill and his family lived in Haiti for 11 years as missionaries serving orphaned, abandoned and at-risk children.
