We are going to talk about you making a business out of finding seller financed notes and “selling” them to an investor and making a nice profit.
Do not be fooled into thinking that tomorrow you are going to be a millionaire. You won't be unless you get incredibly lucky. But if you work this business, within a year you will not have to do anything else.
So let's first talk about a seller financed transaction. We are talking about a transaction between two people, person A the owner, and person B the buyer and person B doesn't want to go through the hassle of finding financing from a bank to purchase what person A has for sale. Person A wants to be rid of what he is selling so they talk and work a deal, where Person A now becomes the financer and person B the payor. Today we are going to look at that transaction in terms of real estate.
Seller Financing Defined
Seller financed transactions have been around since the beginning of time. It has been used most successfully and frequently in real estate. Generally speaking it is the granddaddy of the private cash flow industry. It is fair to say that right now, today there is over $90 billion in privately help single family residence and another $200 billion in commercial real estate notes… and incase you are wondering it doesn't stop there, there are also over 45 other types of cash flow notes out there to work with.
When we are talking about real estate notes, we are including single family homes, condos, commercial (income producing properties - multi unit homes, gas stations, retail properties, office buildings, hotels, motels, restaurants - just to name a few, land notes, and we are talking about mobile homes.
There are sellers, which would be person A from our example above, that would like to covert that piece of paper into cold hard cash. They have already sold what they wanted, but now they want their money now, instead of in small monthly payments.
The best news I can give you today is that those sellers don't know where to go. They need help. They need their money and they need it as soon as possible. And you are going to help them and you are going to offer your help to them for free.
Yes you think I am crazy, I'm suppose to be telling you how to make money and at the same time I am telling you that you are helping them for free. As far as the seller is concerned you are helping them for free, they are not going to pay you for your services. Your fee comes out of the offer that the investor makes to you. But we will cover that later.
Where Do I Find The Notes
Splendid question and I have the answer… everywhere. Here is a list of where to go, who to talk to, and how to get them to come to you.
- Find notes for sale at your County Court house or with a Note Holder list
- Look in the newspaper for sellers - the bigger the city the better
- Newspapers for buyers - offer to purchase the deals they don't
- Talk with Attorneys, CPAs, Mortgage Brokers and Realtors and solicit referrals
The County Courthouse may have you a little apprehensive, but what you are looking for is public record, meaning it is available to the public; you just have to go look for it. The courthouse isn't going to have a list of people wanting to sell, but they will have a list of note holders (which are potential note sellers) that may not know where to turn to get out of the note. They are just waiting to hear from you.
You can purchase note holder lists, there are several service companies out there that supply them. I can not attest to their accuracy or profitability. I used one, and it got me now where. The addresses weren't valid; there was a lack of complete names on the list, no phone numbers, and no email. It was a lot of hard work and headache with no payoff.
Newspapers, this is a little trickier. Nine times out of ten, the seller isn't going to come out and advertise, but it does happen. What I suggest you look for is people offering to do land contracts or seller financed sales and contact them to let them know what you do and what you have to offer them. If they are to find someone to buy on those terms but would like to have cash up front instead, you can help them.
Newspapers for buyers, a great place to get referrals, network and get deals. Just because one broker or investor didn't use the note, doesn't mean that it is a bad note, it just means that it wasn't what they were looking for. So instead of having to turn business away, you can work together, pay them a finder's fee and close the deal.
Network with other professional, the hard sell will be Realtors. You will have to show them the benefit of working with you. So I suggest you know what you are doing and what you are talking about. I put on seminars for realtors, I went to their office, I even befriended a few to show them the legitimacy of the seller financing aspect and what it could offer their client.
The key to being a success with this, is knowing what you are doing. I can not stress that enough. Educate yourself; no one wants to work with an idiot.
In our next issue we will go over a note and what you are looking for to determine its value and what you can do for the seller.
