Christian Osgood explains why asking sellers to finance is the wrong approach. Sophisticated sellers with high equity choose financing to avoid taxes, not because they're persuaded. He shares a recent deal closed with 10% down at 6% interest and outlines a conversation flow: Deal, then Debt, then Equity.
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My least favorite question, but we get it on almost every podcast. We get it in almost every coffee meeting. We get it almost every phone call. How are you convincing sellers to sell their properties seller financed? No, to low money down. I'm going to answer that here in this video so we never have to answer it again. Hey guys, welcome back to the channel. I'm Christian Osgood and we're talking about creative finance today. We're talking about why people would seller finance. To you why no to low money down makes sense and how you can apply these exact methods in your portfolio. The biggest problem with the question that I always get— one person worded it my least favorite way. Just gross. How do you induce a seller to offer you seller financing terms? We don't induce, persuade, trick, con, or otherwise get anyone to do anything that they don't want to do. In fact, anyone who's sophisticated enough to seller finance is likely not a candidate, uh, for any of your sales tactics that you are hearing online. The reason someone will seller finance is typically probably 90% of the time because they are in a position where they do not need or want all the cash. Now, does that sound crazy? It did to me when I got started. Most of the people we work with, though, are people who've been in the game a long time. Now, I've— we've seller financed with people who are 30. I've seller financed from someone who's in their 20s, but a majority are in their 50s and 60s. They have larger portfolios between a value of, say, $5 million to well over $100 million. We have both in our network and there's lots of people like them in every single market around the country. I absolutely promise you. Those people have the cash that they need to run their business. In fact, they're usually trying to get away, get rid of cash. They're trying to put it into something else. They don't want to hold more cash right now. They're actually very concerned with taxable events. You're not persuading them that they're trying to do something with their tax situation, though. As soon as you start talking about their finances, you have lost the game. Because if you're trying to convince them, hey, there's all these tax benefits, If they're a master of the game and they're farther than you, they probably already know that. Also, it's weird to talk about someone else's finances. You're talking about a deal. What often gets offered to us though, if they, if someone with a large portfolio, they paid off a lot of it, well, that means they have a high equity position, high net worth, they probably have the cash they need to do the projects they want to do. When you are talking about the deal, when a deal comes up, you just talk about the deal just like it was conventionally financed. There is absolutely no difference. Tell me about the property. Talk about the location, your experiences. Are there any projects that I need to be worried about on the front end? Anything upcoming that I need to be aware of? And what financials do we have? Go at it like a deal. Just talk about it. You're not worried about the financing or where the money's coming from because there's no deal yet. And the order is always DDE: deal, then debt, then equity. So you get in a conversation with an owner of a piece of property. It's not a seller yet. It's an owner. You build a relationship. They propose a transaction. You talk about that transaction. Cody and I did this this week 2 times. We're going under contract, I believe, Monday or Tuesday this week. For a 2017 build, basically brand new building, seller financed. You can do this new or old. But when we talk to these owners, you sit down, they go, okay, I am ready to sell this building. In fact, I'm ready to sell everything. I'm out of the game. I'm done. Done with real estate. Going on vacation. I'm out. Congratulations. When you hit these conversations, He left it for us as, tell me a story, what are we going to do with this? Okay, well, project over there sold for this much, how do you like this for price? Love it. Does this look like all your other buildings on the street? Yes, it does. Awesome. Been inside the building, I know what it is I'm buying, I want it. Usual 6% interest? That works. All right, let's do this. What do you want for a down payment? 10% down. Perfect deal negotiated. Done. We will close that brand new building seller financed and we're talking mix of 2 and 3 beds, 2-story stainless steel appliances, stone countertops, the whole nine yards. You can find these deals absolutely everywhere because there's owners in every market who have been playing the game for a while. Drive down any street, there's tons of housing. Somebody owns all of it. The multifamily, it's always an investor. You don't typically live in your 25-unit building. I know some people who do, but typically you don't do that. When you are trying to negotiate these deals, that's it though. Don't tell them, hey, this is going to save you a bunch on tax, or like, oh, you're going to make more because I'm going to pay you interest over time. They know the value, the time value of money. They've invested for years and years and years. They have a high equity position in their portfolio. When you are negotiating these terms, this is something that you absolutely have to remember. Don't sell them on it. How do you convince someone to do it? You will never, ever, ever convince someone to seller finance. You'll talk to them and you'll ask if it's an option. If it's off the table, it's off the table. Deal, then debt, then equity. Now, what if you've taken our course and you're all about seller finance and you're so excited to get in zero money down and you have a fantastic opportunity and they say no to seller financing? They don't want to budge. They want to be cashed out. Good news. There are many, many ways to close a conventional deal with partners, even by yourself. If it is a fantastic deal, you can find the money and you can make it work. It does not have to be seller financed. Not every deal has to be low to no money down. If you win on price, for example, which we don't negotiate first, but if you win on price, you get something at 50% of market rate. It needs a little bit of stabilization, but it's not a huge project. So many ways to line up money or line up partners into that project where you can knock that out. Do not worry about how we're buying it or how do I sell someone a financing. Choose the right financing for the deal that's in front of you. What constitutes the deal? What both parties agree on and both parties win with. Remember, seller financing is for people in high equity positions. Which means they typically have access to money. They typically prefer not to be cashed out unless they're going to 1031 into something specific and something bigger. Those are pretty much your options when you have a larger portfolio and you're set on cash. You do not want to be taxed. Let them worry about that. That's about it though. Do not ever convince anyone to do anything. They're not sellers. Their owners when it comes to a financing package, know how to negotiate seller financing, but go after the deal just as it is, as it's presented, and figure it out. Cody and I are looking at doing one of our first ever conventional purchases as we speak because it's right next to the building we like and the deal is going to cash flow day one. Now we worry about, okay, well, how do we qualify for this one conventionally? What hoops do we have to jump through? We're going to find those to line up to an awesome deal. Again, deal, then debt, then equity. I hope this was helpful, and I hope it's the last time I have to answer this question because it grosses me out. We're not gross salespeople trying to pull a deal out of the market. Find the opportunities, find a win for you, a win for your investors, and a win for the seller. And when you can hit everything in alignment, your deal will come together, you will close, the money will appear. I absolutely Absolutely guarantee it. We've never seen that fail. Keep it in order. Deal, then debt, then equity. And like and subscribe to our channel if you haven't yet. We do have a free mini course out. You can click the link below. It's about 10 minutes on how we buy these seller-financed deals, how we find them, and you can do the exact same. Click the button, go there. It will take you no more than 10 minutes. Look forward to seeing you guys on the next episode.
