Owner Financing For Property & Scaling Up There After
We have heard time and time again owner financing does not exist when trying to purchase property. Regarding “owner financing,” We specifically target properties that are free and clear—there’s no mortgage. We buy these with little to no money down, and we make monthly principal-only payments. More so the vendor is motivated for a sale.
Think about this from a diversity stand point—you have massive principal paydown happening, thus dramatically improving your payday No. 3 at cash out. You can create these deals without large amounts of cash, so you’re creating huge equity per deal.
One deal we did was back before the house crisis. We purchased 13 acres of land that had come out of bankruptcy. The land was platted and had all the infrastructure to build 100,000 square feet of small flex units. One we purchased the land signifcantly below any replacement value but more so we got owner financing. We put 10% down which all truthfulness was still alot of money. We were making monthly payments of 6k. All the while we were scurrying to get planning permission granted. However in the midst of all of this we received a phone call and a gent wanted to buy several acres to build his own warehouse for his business.
As my wife likes to keep everything myself and our partner thought it would lower our risk a bit to sell. We all agreed and sold off 4 acres. We paid down the money due by the vendor. Then ironically we received not one phone call but another…Two more gents with different businesses wanted to buy parcels. My wife was fustrated as we had intially thought that this would be our golden retirement…100,000 square feet of 1,000 to 2,000 square foot bays. Regardless as she said, You can always find another dress or pair of shoes…so we kept on selling.
The issue I want to point out depending on someones need and motivation owner financing is a possibility. We made alot of money on this deal and used the funds to buy lend monies as we owned a bridging company at the time in the US plus placed funds into blocks of flats. We are now looking to buy more and more blocks of flats. HMOs seem to be getting more diffiult and competitive. With flats if you can manage them correctly they become a cash cow once you buy them correctly. We buy buildings that need work and have multiple voids. We offered on 3 of them this week. We will place 40-50% LTV loans with capital repayment hold for a period, collect rents and then sell some of the buildings. We always like liquidity. Keep one or two and sell one…
In property …think out of the box.
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