How to Get Seller Financing Without Ever Asking For It

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0:00 Broke people ask for seller financing.
0:02 At the beginning of the deal, people
0:03 come to me saying, "Hey, I don't have
0:04 any money. I'm going to need to learn
0:05 how to seller finance like you did on
0:07 your last 23 deals to start scaling." By
0:09 the way, if you don't know who I am, I'm
0:10 Christian. I run multif family strategy,
0:12 two property management companies, over
0:14 400 rental units, and I was able to buy
0:16 a majority of them through seller
0:18 financing. Now, while there's many types
0:19 of creative finance that we've used in
0:21 our portfolio, as well as a little
0:23 sprinkling of conventional financing,
0:25 you do not need seller financing to get
0:27 started. And if you open with that,
0:29 you're thinking about it wrong. On
0:31 today's video though, I'm going to show
0:32 you exactly how to do it. So, let's
0:33 roll. Hey everyone, welcome back to
0:35 Multif Family Strategy. Again, my name
0:36 is Christian. I'm super excited to share
0:38 this with you today because I'm going to
0:39 share what I think really is the secret
0:41 to seller financing. You don't lead with
0:44 financing. Now, first thing I'm going to
0:46 do in every opportunity is dealt equity.
0:48 And if you follow the channel for a
0:49 while, you've heard this a million
0:50 times. I want you to imagine a car
0:52 salesperson. You are going to go buy a
0:54 car. So, I don't know why this doesn't
0:56 apply to everyone automatically for
0:57 housing and apartments, but play this
1:00 out with me. You go to a car dealer.
1:02 Hey, I'm looking to buy a car.
1:04 Excellent. I have great cars. I can sell
1:06 you a car. All right. What do you have?
1:08 Well, there uh the car is not in yet,
1:10 but when I do have a car in, it will be
1:12 fantastic and you will love it. All
1:15 right. Um, how much am I going to need
1:17 to put down on this car? Well, it
1:18 depends on the make and model that I
1:20 find, but it will be it'll be reasonable
1:22 and it will be good. Okay.
1:24 weird. I'm going to go ahead and leave.
1:26 Now, if you don't have a product that
1:28 you are selling, you can't align a debt
1:30 product to it. You can't raise capital.
1:32 The money doesn't matter. So, if you're
1:34 watching this video and you're like,
1:35 "Wait a second. I thought I was going to
1:36 learn how to buy properties $0 out of
1:38 pocket magically on this video." I will
1:40 show you how to do that. But the way
1:41 that you go about it is not looking for
1:44 seller financing. We're not searching
1:45 online going, "What is seller
1:47 financable?" or "Look for only seller
1:48 finance listings." We're not targeting
1:51 the listings. We're looking for deals.
1:52 Now, on a deal, you can win on two
1:54 sides. You can win on the terms or you
1:57 can win on the price. And if you win on
1:59 both, congratulations. Just amazing
2:00 deal. But you can do a deal on either
2:02 one. You need to make sure that it cash
2:04 flows in long-term cash flowing fixed
2:07 rate debt. If you can do that, you can
2:09 buy infinite amounts of real estate. You
2:10 can do this again and again and again.
2:11 Every time you close, your income goes
2:13 up. If you can't win on price and you
2:16 can't win on the terms, guess what? You
2:18 don't have a deal yet. Don't buy that.
2:20 It's that simple. So, instead of
2:22 discussing the financing first, which is
2:24 basically putting a sticker on your
2:26 forehead saying, "Hello, I'm broke and I
2:28 don't know what I'm doing," we're going
2:29 to ask them about the deal like we would
2:31 if it's bank financed. Tell me about the
2:33 property. Is it still available? Why is
2:35 it that you're trying to sell it? Or if
2:36 you're talking to a broker, what do we
2:38 know about the seller's motivation? Why
2:41 are they currently selling? And what is
2:43 their goal with the transaction? What
2:46 you're trying to do in the beginning of
2:47 the conversation is you already know
2:48 what a goal for you is. is long-term
2:50 cash flowing fixed rate debt. We want to
2:51 increase our income permanently by
2:53 buying a property. Now, on their end of
2:55 the equation, what are they trying to
2:56 solve? Are they trying to do estate
2:58 planning? Are they trying to scale up?
3:00 Are they trying to scale down? Are they
3:01 trying to get liquidity? Are they trying
3:03 to supplement their income? What is the
3:05 actual objective? If you can figure out
3:06 the objective, that's very helpful. Now,
3:09 we talk about the deal. If you jump into
3:11 the money, again, you're just going to
3:12 sound broke. So, we talk about the
3:14 financials of the deal instead of your
3:16 money. No one cares about your money
3:18 right now. We're going to talk about,
3:19 okay, talk to me about what does income
3:21 look like? What do you think it should
3:22 be? What's the highest rent we've proven
3:24 we can get there? I don't want to see
3:25 proforma, but if you have, which means
3:28 basically made up numbers, that's what a
3:29 broker will send. The projections is the
3:32 perform. What I want to see is if you
3:34 have a building and say they're all the
3:36 same. They're all two-bedroom, two bath
3:38 units, it's a 10plex. And while a lot of
3:41 them are rented at 800, you have two of
3:42 them rented at a,000. I believe a
3:45 proforma that says we can get rents to a
3:47 thousand because you've proven that you
3:49 can do it two times over. I think that's
3:50 a reasonable assumption. Now maybe the
3:53 broker is saying well market rate is
3:55 a,250. If that's true, why haven't they
3:57 got it there? These are the type of
3:59 questions that I want to start having in
4:00 an actual conversation. I don't want to
4:02 pay for work that hasn't been done yet
4:04 on a project. That's my upside and my
4:06 work and my risk. But we're talking
4:08 about the deal. Then I get into the
4:10 financing. All right. Based on the price
4:12 that you want, how do you think the
4:13 bank's going to look at this? Do you
4:14 think that we're going to be able to
4:15 swing this one 80% down? What What
4:18 obstacles do you foresee us running into
4:21 at the bank level? I want to make sure
4:23 we get the financing. This is where they
4:25 bring up there's some deferred
4:27 maintenance that we may need to address
4:29 to get the right insurance to be
4:31 bankable. So, deferred maintenance,
4:33 we've asked the question, hey, the
4:35 income today might not quite fit into
4:38 the bank's standards for income on the
4:40 property. Call this the DSCR, debt
4:42 service coverage ratio. Income might be
4:44 a little low. They might need more down
4:46 to make this work. Okay, that's really
4:48 good to know. This is setting up the
4:49 stage for potential seller financing,
4:51 but again, we're not talking about our
4:54 money or the financing. We're talking
4:55 about the deal. Then we're talking about
4:57 all the available debt products. So, if
4:59 we go through and we find that bank
5:01 financing is perfect for the property,
5:03 very likely we're going to use bank
5:05 financing. We found our debt product. If
5:07 we found there's deferred maintenance,
5:09 there's bad bookkeeping, there's not
5:11 enough income to get a bank loan yet.
5:14 Now, it is natural and normal to ask the
5:16 question, all right, it looks like the
5:18 deal works. If we can get the right debt
5:20 product, it doesn't look like it's
5:22 bankable today. I would like to get a
5:24 path for me to get control of the
5:25 property and get it to where it needs to
5:27 go. If you believe that we can hit this
5:30 income like I do, we shouldn't have any
5:32 problems operating it. I'll give them a
5:35 20 second spiel on here's what I'm
5:37 trying to do. I'm trying to retire my
5:38 wife. So, I I am after cash flow. I am
5:40 on a mission trying to retire my wife
5:42 through real estate. This is exactly
5:43 what it's going to look like. Uh for
5:45 this project, this looks like just about
5:48 what I'm looking for. Again, not
5:49 bringing up the financing yet.
5:52 I need to get the income up on this to
5:53 get the bank financing. So, I'm going to
5:56 need some time on this and the interest
5:58 rate where it looks like this is going
5:59 to work is going to be about 5%. which
6:01 is going to result in and I will give
6:03 them the actual payment. So what what
6:06 I'm thinking and then give them an
6:07 actual proposal. Don't throw out like,
6:09 oh, are you open to carrying a contract
6:10 or would you entertain seller financing?
6:13 You're teeing yourself up for a no. All
6:15 you're asking is, hey, this is what I'm
6:17 thinking. I'm thinking on this
6:18 million-doll property, I can put
6:20 $200,000 down. Even if you don't have it
6:22 yet, you're going to find the money.
6:23 Figure out the debt first. Deal, then
6:25 debt, and then we'll figure out the rest
6:26 of the money. So I I can put 100 down or
6:28 I can put 200 down. this deal is only
6:30 going to work at 5% interest while I
6:33 actually get these incomes up or I do
6:34 these renovations or I do these repairs
6:36 or I get the right insurance whatever it
6:38 is that you're doing in your project.
6:40 You explain why you are using the
6:41 financing that you are to get to where
6:43 you need the project to be at such time
6:46 it works great in bay bank financing we
6:48 can go ahead and do a refinance so we
6:49 can cash you out. This is what I think
6:51 any bank is going to look at as well is
6:53 hey if it's not conventionally going to
6:55 be bankable why are we looking at
6:57 cashing them out let's come up with a
6:58 roadmap to get them to exactly where
7:00 they want to go you are not asking them
7:02 to concede anything you are giving them
7:04 a plan to get them exactly what they
7:06 want that is the difference with an
7:09 experienced investor negotiating a deal
7:11 is we're doing the deal first then we're
7:14 talking about the debt products and then
7:15 we're giving them an actual proposal
7:18 this works at 5% interest I'm going to
7:20 need three years. I may be able to bust
7:22 this out in two years to be safe, but
7:23 three, four, five years. Many of my
7:25 seller finance notes, I have found that
7:27 the seller's actual goal was, I'm
7:29 looking for a long-term income for my
7:31 family. Many of them, they they pitched
7:33 me on seller financing. They're like,
7:34 "Well, you can cash me out, but if I can
7:37 get a little bit more in price, I have
7:39 15, 10, and 30 years seller finance
7:42 notes. You can absolutely get long-term
7:44 debt if someone wants to get cashed
7:45 out." We learned that in the
7:47 conversation and now our proposal
7:49 actually matches what they're trying to
7:50 do. And this is the difference between a
7:53 rookie investor trying to buy zero down
7:55 real estate and an experienced investor
7:58 coming in and buying low to no down real
8:00 estate. Now, you may be thinking, and
8:02 rightly so, wait a second, you just said
8:05 200 or $100,000 down. That's not no to
8:08 low down real estate. Well, the beauty
8:10 of that is there's a lot of other ways
8:13 that you can bring in money. You can
8:14 bring in equity partners. You can bring
8:16 in private capital. You can get a second
8:17 note. You can do a pledge agreement to
8:19 get your LLC. There are so many
8:21 different ways that you can bring in the
8:23 down payment. But we don't know what
8:25 returns we can offer an investor or we
8:27 don't know how much excess cash flow
8:28 there is for additional debt until we
8:30 negotiate the deal and our primary first
8:34 position debt product. That is your
8:36 mission on the call. Negotiate to the
8:39 deal and the debt. If there is room at
8:41 the end where there is room to push the
8:43 value of this property or there's so
8:45 much cash flow you can take on
8:46 additional debt. You've answered the
8:49 question for the remaining capital. Now
8:50 we're going to line up that capital to
8:52 whatever investor. Remember the car
8:53 analogy. I now have my vehicle. Okay.
8:57 You didn't know what you were getting
8:59 car-wise. Well, now the car is in the
9:01 shop. No, it's not a Ferrari. It's also
9:04 a lot nicer than your Honda Civic. Our
9:06 actual deal here, we're working with I'm
9:08 not a car guy, but we're working with
9:10 this Lexus and it has we're getting a
9:12 fantastic price on it. The payments are
9:14 now within your budget. I can line up
9:16 the opportunity to the right person
9:18 because I've actually found the deal and
9:20 the debt products. I can tell you what
9:21 it costs. I can tell you what the cash
9:23 flows are. I can tell you everything
9:25 about our actual vehicle. And that is
9:27 what you are building. Every time you
9:28 negotiate a deal, you're creating an
9:30 investment vehicle. Sometimes you get
9:32 100% seller financed. It's rare.
9:35 Usually, this is how you lay the
9:37 groundwork to get your offer accepted,
9:39 and that is how you do seller financing.
9:41 For context, I've done this on 23 or 24
9:44 of my last 30 deals. Creative finance is
9:47 awesome. It can get you into deals that
9:49 no one else can do, and it is
9:50 ludicrously simple if you follow the
9:53 order of deal debt equity. I'll see you
9:55 on the next episode.