What is the number one problem for every real estate investor?  MONEY!

Twenty years after I started in real estate investors are still scrambling to find money for their real estate deals.  A few days ago I talked about having to go back to my real estate roots to find solutions to my everyday financing struggles.

Twenty years ago a flier showed up on my desk that said, “close more deals without any bank financing.”  I called the number, talked to a woman and bought a course on Seller Financing.

What is Seller Financing?
“Seller Financing” or “Owner Will Carry” are the magic words that make any product or service more salable.  In real estate, financing is created between the buyer and seller.  The seller agrees to receive their equity or profit in the form of monthly payments with interest over time (paper).   To create this type of transaction, a promissory note (IOU) is signed between the buyer and seller.  The promissory note is called the debt instrument.  A lien is then place on the property.  The legal name for this lien is Deed of Trust or Mortgage.  The lien is called the security instrument.  The buyer (borrower) makes monthly payments for a specific period of time at an agreed upon interest rate.  If for some reason the buyer (borrower) stopped paying the seller (lender) their payments, the lien (security instrument) allows the seller (lender) to foreclose and take back the property from the buyer (borrower).  That was a mouthful and I wrote it that way so you can see who the players are when seller financing is offered.

This created financing between buyer and seller is also called real estate paper.

With the collapse of the housing market together with the credit crisis, getting any type of real estate loan has proven difficult.  Those who were labeled “strong borrower’s” are having to jump through countless “documentation hoops” only to find out in the eleventh hour that their loan has been denied.

If you want to compete in today’s real estate investing market, you should arm yourself with the understanding and mastery of seller financing or real estate paper.  When you understand the time value of money, interest manipulation, discounting, defaulted real estate paper, compounded interest and yield, you’ll open up a whole different world to real estate acquisition.

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