Three questions we are constantly asked are:
What is owner financing?
Why is it your choice of investment strategies?
How does it work?
Owner financing occurs when the owner provides the financing for the buyer to purchase the house, instead of the buyer seeking help from a third-party.
Instead of having your buyer borrow the money from a bank or mortgage lender, the ownership themselves lends the money to the buyer so they can purchase the property. Thus, instead of the bank or mortgage lender collecting all money from the interest on the loan, as an investor we collect all that interest over the life of the loan.
Yes, you can sell houses and create mortgage loans as an investor.
First, owner financing allowed me to start investing in real estate and build significant wealth over a relatively short period of time without having to possess a great deal of cash or have great credit.
Actually, most of the houses that I buy do not require any cash or any credit. Purchasing houses this way means that I have no limit on the number of houses that I purchase in any given year, or even throughout my investing career.
Second, this is the only investment strategy that allows every participant in the transaction to “win “(get their goals and or objectives met or exceeded). In any other investment strategy, the investor has to capture most or all of the owner’s equity to make money. That is not true using owner financing. Actually, the way that we buy houses gives the owner’s the opportunity keep their equity while I still make allot of money.
Three, buy and selling houses with owner financing is by far the most profitable strategy. Using this strategy, over the last almost decade, we have been averaging about 154% profit on every house we buy and sell. Not only do we average about 12.5% down payment (which is more than most fix-and-flips and wholesale deals), we then collect thirty years of passive income.
Why are owner finance deals good for the seller?
Why are owner finance deals good for the buyer?
Personally, it makes me feel great just thinking that I am contributing at least a small part of these benefits for my sellers and buyers. I love watching families start dancing in the parking lot right after they have purchased a house – I cannot tell you how satisfying it feels being a part of giving someone that opportunity.
Why are owner finance transactions good for the investor?
Owner financing transactions allow everyone in the transaction to “win” (meet or exceed their objective for the transaction). With any other transaction, the investor is looking to buy a significant amount of the seller’s equity which results in a “win” for the investor and a “lose” for the seller. There is no judgement about this nature of traditional real estate investor transactions, it is just the nature of that beast.
Other real estate transactions rely on only one component of the transaction to make money: traditional equity. Traditional equity is the difference between what I paid for property plus any repairs and or upgrades and what I received when I sold the property.
With owner finance transaction, we rely on all four components of the transactions to make money. This allows us to pay the seller the vast majority of their equity, which allows them to “win” while we earn our money on all four components of the deal, allowing us to “win” as well. Let me explain:
When we take advantage of all four components of profitably, we have historically generated well in excess of 100% profit from every house we have purchased, on average.