Epic Real Estate Investing - Typical Owner Financing Terms (defined!) | 752

Episode Date: August 22, 2019

In today’s episode learn the basics of owner financing terms when purchasing real estate and how to negotiate for owner financing in the process. Specifically, Matt goes over a BIG list of terms and show you how to put them to work (without limits and without banks of course). Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, Rockstar, I got a really hot show for you today. And what I did is I pulled the audio from a video that we have over on our YouTube channel over at epic rei. We just pulled the audio out. And there's going to be a lot of definitions, a lot of things that are going to kind of assume that you can see what's on the screen. But all the data is here, all the information is here. It's whole and complete. I think you're really going to enjoy it. But if you actually want to see what I was talking about, go over to epic rei.tv.

and then just search typical owner financing terms, and you'll find the video there. All right, take care. This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that.

for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit r-e-i-a-a-a-a-accom. Here's Matt. Are you looking for a list of typical owner-financing terms? If so, I'm going to do you one better. I'm going to give you a big list of typical owner financing terms, and then I'm going to show you how to put them to work

so you can build your real estate portfolio without limits and without banks. Ready? Just a note. This is a rather advanced training that you really won't learn this way anywhere else. All right. Okay, I'm going to give you a list of typical owner financing terms, but understand this. The foundation of every deal lies within the seller's motivation to sell. Meaning, if the seller isn't motivated, it's going to be a lot tougher to strike a deal using

these owner financing terms. However, the greater the motivation, the more likely they are to cooperate and the greater the deal that you can strike for yourself. All righty. Now last thing, before I give you these terms, as a real estate investor, from this day, moving forward, I want you to think like this. It would behoove you to adopt this philosophy. And that is, I buy houses in one of two ways, by my price in the seller's terms or the seller's

price in my terms. As long as I, as long as you, can control one, I can always make a deal for myself. Most people, they understand the price, but very few understand the terms. So I want to make it very simple just to begin. So if I said, I'll pay you a fast nickel for that house. nickel is the price, fast is the term. Or I'll give you a slow dime for the house. Dime is the price, slow is the term.

That's a philosophy. Now, the real world implementation looks like this. The starting point is a fast cash offer. Low price, fast cash terms. This is pretty much the only thing your competition understands, by the way. They are one-trick ponies offering fast nickels every single time. But what if the seller says no to the nickel part? Most give up.

But after you and I were done here, you'll know how to offer your terms in exchange for that higher price. So it's still a deal for you. So you can snatch these deals right from your competition and the ones that they're losing. Ready? So the price and terms, work in conjunction with each other like this. The higher the price, the longer the term. The lower the price, the shorter the term. Now, typical owner financing terms.

Here's the list that you've been waiting for. We'll make it simple and we'll get progressively more advanced payments. A payment is the trade of value from the party to another, from one, party to another to fulfill a legal obligation. Interest. This is a payment from a borrower to a lender of an amount above repayment of the principal amount borrowed at a particular rate.

Principle, a capital sum earning interest due as a debt. Credit, the provision of money, goods, or services with the expectation of future payment. Down payment. A part of the full price paid at the time of purchase with the

balance to be paid later. Balloon payment. A final payment that much larger than any earlier payment made on a debt. Moratorium. An authorized period of delay in the performance of illegal obligation or the payment of a debt. Profit share. Payments to principles in a transaction that depend on the profitability of the transaction. Option.

A contract that offers the buyer the right, but not the obligation, to buy a property at an agreed upon price during a certain period of time or on a specific date. lease, a contract by which one party conveys property to another for specified time, usually in return for a periodic payment. Lease to own, a contract that combines elements of a traditional lease agreement with an exclusive option to purchase. Carry back when a seller acts as the bank or lender and carries a mortgage on the subject property. Subject two, buying a home subject to the existing mortgage, while title is transferred to a bank, buyer, the existing mortgage stays in place where the buyer takes over the payments. Deferral, a postponement of an action or event, like deferred interest, deferred profit, deferred down payment.

So there's your list of typical owner financing terms. There's enough there to make you really dangerous. Now, as promised, let's see what they look like in practice. So here we have a house. It's valued at $100,000. The seller's bottom line is $95,000. They're not going to take anything less than that. It rents for $1,100 a month. And to keep things simple, we'll assume right now that there is no mortgage on the house, nor does it need any repairs. So we might start our offering at $60,000 cash. That's our fast nickel scenario. The seller says no, so we might offer a slow dime type scenario of $70,000 to be paid as $7,000 down, $63,000 at 5% amortized over 30 years. The seller still wants a higher price.

So we ask for an even longer term. We then could offer something like $80,000 to be paid as $10,000 down, $70,000 at 4% interest-only payments, balance due in 10 years. See how that's working? Higher the price, longer the term. Sellers still says no to the price. So we could offer $90,000 to be paid as $15,000 down, $75,000 divided by 150 equal monthly payments. or if the seller still isn't happy with that, would you consider doing a deal like this

and actually overpay for the house by offering $120,000 paid as follows? $20,000 down, $500 a month, six-month moratorium on first payment, and the remaining balance due in 15 years. Would you do that deal? And overpay for it? Here's why if you lose control of the price,

you can really recover with the terms. Look at this. If you were to pay market value for this house with traditional bank financing at a price of $100,000. That would typically look like this. 20% down, 30-year bank mortgage at 6%. And then over the lifespan of that 30-year mortgage,

when you account for the interest, you actually pay $180,000 for it. So in this last example, where we offered $120 for this $100,000 house to be paid as the $20,000 down, $500 a month, a six-month moratorium with the remaining balance due in 15 years, it's actually still much less

than you would have paid using traditional finance. financing. You see, you only paid 120K for it. And you had a much stronger cash flow along the way. Yes, you pay $120,000 for this $100,000 house. It's a steal with these terms, right? This is how we do it. When a seller says no to our fast nickel offer, we offer them essentially three different types of slow dime offers using this three option letter of intent. Let me introduce you to Nathan. He's a client of mine, and he sent this video to me recently for our last epic intensive because he couldn't be there in person. And check out what he did with this deal using the three-option letter of intent, using many of these owner financing terms that we just went over.

Listen for how many of them that you now recognize. Hey, Matt. Nathan Price, you're in Spokin, Washington. I just wanted to give you a quick update on where my business is since I've concluded my coaching with you. First of all, I just want to tell you thank you so much for everything that you've taught me. you've really kind of paved, paved the way for me to gather and garner the success that I've had. So past 12 months, I've done about 44 wholesale transactions with average profit margin of $9 to $11,000. This has been accomplished primarily by the systems I have been able to put in place here.

I got a couple of VAs working for me. The biggest one has been my acquisitions manager. been able to bring him on, brought him on about April. He's been with me for a few months. There's a few hiccups along the way, but he is awesome. His closing ratio is pretty darn good. Definitely puts mine to shame. So I'm grateful that I was able to kind of leverage one of my weaknesses into a strength.

So my focus kind of moving on, is to gather more rentals. So this guy right behind me here, picked that up a few weeks back. I paid just about market value for it. About 9,000 down. It's going to need a little bit of work. And it should be able to rent out for $12 to $1,300.

Picked it up for principal-only payments. So seller financing, 15-year note. First five years, principal-only payment. it's of $500 a month. And then after that, the remaining balance will be amortized over 29 years with a 3.5% interest payment. So it brings the payments up to $508, I believe.

And so it's going to run out for $12,300 or $1,300. So the cash on cash return on that is very favorable. This came from a three-option letter of intent. that my acquisitions manager presented to the seller here. So that I'm going to be picking up more of these. Love these principal-only payments. Anyways, thank you for everything you've done for me, everything that you've taught me.

Sorry, you can't be at the Epic intensive. Make sure you tell everyone high for me. All right, Matt, take care, and we'll chat later. So if you haven't done the math, I'll do it for you. That's a 96% cash-on-cash return. your money invested would double every nine months at that rate. How many of these types of deals would it take for you to reach financial independence? Not many, right?

Now, if a house does have a mortgage on it, no worries. You can still do this. So rather than crafting price and terms for the entire house, you just take over the property subject to the existing mortgage and simply present your price and terms offer on the equity spread that's left in the property. So I'll see you next time. All right, take care. Yeah, yeah, we got the cash flow

Huh, yeah, yeah, we got the cash flow Yeah, yeah, we got the cash flow You didn't know home board, we got the cash flow Podcast is a part of the C-suite Radio Network For more top business podcasts, visit c-sweetradio.com