so what is owner financing hey what's going on guys this is Daniel one half of
the Kwak Brothers and in this video we're gonna talk about a concept that is
being talked about a lot of different real estate investing spaces and it's a
topic that we honestly here at the clock brothers have posted a lot about and
it's this idea of owner financing right seller financing agreement for deed
contract we need whatever you want to call it let's go ahead and talk about it
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right now it's absurd right anyway anyways guys so let's talk about owner
financing before I start you know sounding like one of those Fox CNN
individuals but let me tell you a story how I came across this idea of seller
financing to even begin with so as many of you guys know or may not know you
know when I first started in the world of real estate investing I didn't have a
whole lot of money to my name you know I think I had about negative one hundred
eighty seven dollars my bank account I had a couple maxed out credit cards life
wasn't good you know and then people just I honestly just saw myself as a
loser if I'm gonna be completely honest with you and guys I know it may be a
weird thing to say on a youtube video but I know that a lot of people
listening may honestly be nodding their heads right now be like man I've been
there brother I hear exactly what you're saying
so I had this dream of you know wanting to start a real estate investing company
but I had no money I had terrible credit and I just didn't see a way you know to
get around that until somebody came up to me and talked about hey I bought this
property owner financing I was like what is that and for me owner financing
became the great equalizer it meant I could go after a deal that somebody with
a hundred thousand a million dollars even ten million dollars cash
could go after I can compete at the same level so what is owner financing and let
me share with you the best context for you guys to use it so owner financing is
a very very simple acquisition strategy it's actually a lot easier than what a
lot of gurus and a lot of online different forums are making it you know
because as human beings that's what we tend to do we complicate things so owner
financing is when you go to a seller instead of a bank and you have the
seller carry the note that the property is purchased upon so let's break this
down even more so traditionally speaking if you were to buy let's say a 10 unit
apartment complex because in my opinion it works best if you're looking to buy
and hold the property for the use of its cash flow so let's say you're going
after a 10 unit apartment complex okay do you visualize it
awesome right Scott like beautiful windows and it's got you know separate
units and things like that it's great right and it's in a Class B neighborhood
it's the most ideal investment for you so you get this 10 unit apartment
complex ideally speaking if they were asking let's say a million dollars you
know they asked a million dollars for this 10 unit apartment complex
traditionally speaking you would go to a bank you would talk to a commercial
lender you would be taking what's called the underwriting process meaning that
they would look at you pull your credit report they would ask for your income
tax return they would ask for your business tax return they would ask for a
lot of different things because they want to mitigate their risk if the bank
is gonna give you a loan they want to see you as a safe risk because banks
like to make money yes but at the same time they want to make sure they receive
that money according to how good your financials are and they're also going to
ask for the property's profit and loss statement they want to see if the
property is going to perform as well as it should and they're gonna come up with
a number called a DSCR that's a debt service coverage ratio and they want to
see how well the net income of this 10 unit building is going to be able to
cover this debt right this monthly mortgage payment that you're
to make to the bank all of this to say listen would you go to a bank for this
10 unit apartment complex you're gonna have a lot of Hoops to jump through not
only are gonna have your personal underwriting the building underwriting
but chances are you're gonna have to go through an appraisal and which is you're
gonna have to pay for which by the way guys the last appraisal that I had was a
36 unit apartment complex that I did buy through a bank financing and the
appraisal was like $15,000 that's what it costed me for me to get the appraisal
report so you're gonna have to go through that and then you also may also
have to go through a specific loan underwriting time period meaning that
you're not gonna get the loan officially you're not gonna be able to close for an
additional two three I've seen as long as four or five even six months in which
the bank is going to underwrite you they're gonna look through all these
papers they're going to get the appraisal done they're gonna and also a
lot of banks they do their own inspection so a lot of banks have their
own inspector on staff they have the inspector go out to the property which
scheduling that thing in itself can oftentimes be a nightmare depending on
the bank so guys you know there's a lot of Hoops there's a lot of things that
you're gonna have to do if you want to go through the whole bank financing
route well the owner financing route is pretty much when you have your seller be
the bank now this can be advantageous for the seller in many different ways
they could you know potentially defer a good chunk of their taxes they have the
ability to close quicker because I've closed as fast as three-day guys upon
meeting the seller and seeing the property for the first time you know I
think there's a eight unit building I bought no money down which is why I was
we were close so quick saw the property for the first time on Tuesday close it
on Friday all right so that's the beautiful thing and you're a bit closed
and for the seller there they have a continuation of income coming in they
have money coming in every single month you know without having to worry because
their money is coming through a note they gave you so seller financing
overall is when you have the seller be your bank so you're able to negotiate
the term so just as you know and then here's another benefit guys if you go
Banke they're gonna set the terms for you right they're gonna give you the
terms according to how strong your financials are how good of an investor
what's your track record how good the property is if you're talking to a
seller you're able to negotiate those terms so for that 10 unit apartment
complex instead of going to the bank let's say that you go ahead and talk to
the seller you and the seller talk you see that the seller has a lot of needs
and and concerns that can be addressed and be solved by acquiring the building
through seller financing and so the seller is gonna say okay well let's go
ahead and negotiate the terms now for me I always tell the seller listen is it
more advantageous for me to do seller financing or is it more advantageous for
me to go to the bank that's completely up to what you and I discuss I'm gonna
get 4.5% at the bank what can we do with you and I write what can we do between
the two of the same thing with a down payment same thing with the loan years
so typically guys my cookie cutter I guess terms that I'll say in terms of
what's gonna work is 4% interest 25-year amortization you know and also about 10%
down that's typically what I'll do for seller financing and most of the time
90% of times seller says yes to that they're like okay that sounds pretty
fair so I'm having the seller be my bank I'm giving payments to the seller
instead of my bank and there's no bank involved and because there's no bank
involved you know there's no credit checks the sellers not gonna say hey I
want to see your credit report you know this is not gonna do that
you know same thing with a very strenuous and strict underwriting
process a seller is not gonna drag me through the mud like a bank is going to
so guys in a nutshell that's the basic definition of seller financing I know I
talked a little bit differently about you know the benefits to the seller some
terms I like to use but I want to just give you guys a little taste a little
hint of everything else you're gonna find in our YouTube channel regarding
owner financing we do have a lot of resources and content that revolve
around this topic you know there's a video which you know my brother and I do
a little roleplay in terms of negotiating but also guys I want to give
you a free gift because you stuck around to the end of this video I wanna give
you a free gift and it's the free owner financing
Gide the link is in the description below for that and it actually includes
the chica it includes a free and complimentary three-hour course that I
put together with myself and very good friend attorney of mine mr. Steve
Hamilton and we're talking about all the ins and out of owner financing and if
you're an individual guys that like me you know five six years ago you don't
have the money to to buy properties you know you don't have the credit to be
able to go to a bank and get a good loan well I'd like to encourage you to look
into the strategy and see if this is for you see if this is something that could
benefit you and help you in terms of growing your real estate investing
portfolio because guys I bought a lot of apartment buildings and even
single-family houses and duplexes and for plexes vs seller financing and it
gave me the beautiful beautiful ability to get the most bang for my buck
so again guys hopefully this video helped you out don't forget to click on
the links in the description below and also guys give this video a thumbs up it
really helps us with the algorithm in terms of being able to share this video
and allowing a lot of other eyeballs to see this information I mean who knows
right you might share this video and you might have a kid who's 20 years old with
negative 187 dollars in his bank account and this kind of starts his career in
the world of real estate investing so hope you enjoyed this video I hope to
see you guys in the next one