Hey everyone so you always hear me talk
a lot about how I buy all my properties with none of my own money I find my
flips that way by my rentals that way and lately we’ve been flipping a lot of
houses we have some more capital or some more funds capital is just kind of like
the swanky word for that so we have some more funds so what we try and do with
those funds is either lend them out or we’ve been looking at some multifamily
properties and possibly putting money now on them I always try to buy without
putting any of my own money into them but sometimes I come across a property
that I feel is too good to pass up so I’m willing to come out of pocket
with some money these days because I have a little more funds available so
welcome to our talk today we’re gonna chat about how I bought four unit using
seller financing my name is April Presley I buy rental properties and flip
houses in Berks County Pennsylvania and thank you for joining me on youtube if
you like you see in the videos make sure you click like and subscribe to the
channel so you don’t miss anything so let’s get started and talk about this
for unit this is a four unit that was seller financed and someone that watches
my youtube channel Matt actually if ty path if you’re watching actually asked
me how do you buy on seller finance and there’s a lot of different ways you can
structure a seller finance deal this is just one example okay from a property we
recently purchased so this was a four unit we seller finance and the biggest
lesson I learned is patience now if you know me personally I have zero patience
or maybe negative you could be in the negative with patience I probably be in
the negative but I’ve been working on it because patience is a huge killer of it
yeah if you don’t have patience lack of it I’m sorry lack of patience is a huge
killer for just about any business owner so it was a huge lesson in
with this deal this was an older gentleman that owned a four unit
apartment building in my area and people are gonna ask how did you find the deal
direct mail I did direct mail he got a direct mail letter from me and he called
me this was the only building he owned okay he’s not really cut out to be a
landlord am i not cut out to be a landlord
I mean he’s do-it-yourself repairman who’s not a licensed contractor
so repairs at the property were really shoddy he lived close by so he would
stop by and pick up the rent in cash tenants were just walking all over him
his rents were under market tenants he just did not have a good relationship
with them he didn’t communicate professionally with them it just wasn’t
a good situation so he knew what he knew was that he liked getting money from the
building and you have to listen to what sellers tell you so when he called me he
said I’m not cut out to be a landlord so that’s his pain point I like getting
money from the building so that’s what he enjoys about the process so I just
married those two and said have you ever thought about seller financing and he’s
like I don’t really know what that means my next question was do you owe anything
on the building he said I don’t it’s free and clear I go there every month I
pick up like $700 in cash I like it two of the apartments are empty – or rented
one ladies moving out so he’s got another ping point he’s got apartments
that are vacant he’s got people moving out he had an apartment that was vacant
for over six months if you’re a professional landlord that’s giving you
chest pain okay I won baby over 30 days I’m having a freaking heart attack over
six months he had a unit vacant so he was motivated he wasn’t like running the
building efficiently he’s like as long as I can go there and I have like two
units run in I’m making seven hundred bucks in cash that’s good for me so I
said what if I can keep making you $700 in cash every month but you don’t have
to deal with the building at all these like will allow me
like okay now we’re getting somewhere so let’s talk about seller financing so I
explained it to him as I can go to a bank and get a loan or I can come to you
as the seller and get a loan from you and I had to explain the whole process
like the loan is secured by a mortgage just like a bank he can do a credit
check on me a background check he can get
I’ll give him copies of my bank account balances I’ll fill out a personal
financial statement just like a bank would ask for Bank ask for all that
information I gave all that information to him it took us over four months of
educating about what seller financing was negotiating back and forth okay
about it as soon as I thought we were coming to an agreement he’d be like but
the other day I was talking to my accountant or I was talking to my
attorney or I was talking to my friend everybody’s got accountants attorneys
and friends but they turned to but don’t know anything about real estate
investing okay his accountants trying to get him to like sell it buy annuities
his his attorney has no idea about real estate it was just a mess I actually
ended up linking him up with my attorney so that she could help educate him and
like vouch for us so your team is really important
four months later we finally had this thing hammered out and under contract so
be patient cuz it’s worth it I’m gonna go over that with you so our purchase
price was a hundred and forty thousand that was our agreed-upon
purchase price we went back and forth forever about how much money I was going
to give him down did he one I of course want to put as
little down as possible because it’s money coming out of my pocket did he
want five thousand down ten thousand down twenty thousand down at first he
was like I want like twenty-five thousand dollars down I’m like if I were
just gonna put $25,000 down I let’s go get a loan from a bank like the reason
I’m coming to you is more flexible terms I’m trying to keep you making money
etc so where the accountant did come in handy was based on the sellers current
income his accountant didn’t want him taking any large chunks of cash because
what that would do was kick him into another tax bracket for the year and the
accountant was like you don’t want that because you’re gonna not paying more in
taxes or other things going on in his life with his income and some family
members that had left him money and the accountant didn’t want him taking a lot
of money so we settled on $15,000 so sometimes you have to adjust your
numbers and you’re laying out your seller financing terms you have to be a
little bit flexible sometimes that’s less down money more
down money but you can balance that out by using using a lower interest rate or
a higher interest rate or a longer term or a shorter term so the more money he
wanted down I could have said okay I’m going to give you more money down but I
want to amortize it over 40 years instead of 30 years there’s tons of
different ways you can flex and change the seller financing terms so one forty
fifteen thousand dollars down if I would have had the same purchase price with a
bank a bank loan and not a seller I would have had to put thirty five
thousand dollars down so I’m putting fifteen thousand dollars down instead of
thirty five thousand dollars down not only that but banks sorry if you work
for a bank or a total pain in the ass okay it takes like six to eight weeks to
close a loan they make you jump through a bunch of Hoops it’s just a long
drawn-out process a ton of paperwork I takes forever so we were able to close
quicker because we did seller financing and I was able to put less down now I
told you I had money that I needed to move and I told you like extra funds and
I told you the seller was it do-it-yourself repairman which basically
means nothing was done properly okay don’t do stuff yourself if you’re not a
licensed contractor hire somebody okay so there were a lot of things that
the property I knew I had to fix right away now my area they do code
inspections so if you own rentals they get inspected every year or every two
years every three years depending what area you’re in this property was code
inspected and there were lots of things that were missed that were not safe so
because I only put 15,000 down that left more money for me to put into the
property to make it safe to upgrade it and why do I want to upgrade it because
I’m gonna raise the rent okay so we financed but 15,000 now
financed 125,000 at 5% for 30 years where did I come up with 5% he wanted 5%
he was stuck on 5% if you can get me 5% interest that’s what I want because my
accountant told me that’s what I can get if I put my money into an annuity and I
was like sure I get your 5% no problem so we finance 125 5% for 30 years if I
would have financed with a bank I would have had to finance on a 20-year term
maybe 25 but more likely a 20-year term the shorter the term the higher your
payment is going to be the less cash flow you’re gonna have okay short of the
term higher the payment West cash flow got that got it okay so my monthly
payment to the seller was 671 a three and what if he told me in the beginning
I like if I can have $700 a month cash that I pick up from this property that
was what was important to him this is we’re listening to sellers really comes
in handy because then I said look I’m getting you almost $700 a month that’s
coming to you every month just like you would pick up at the property he was
like and I don’t have to do any here at the property and I don’t own it anymore
I’m like you’re not responsible for taxes you’re not responsible for
insurance you’re not responsible for repairs tenants will never call you
again nothing so the deed transferred we bought the
property and the deed transferred and I was responsible for everything
these were my rent when I bought the property totaled 23
or to 23,000 that’d be really nice 2,350 a month what I did was I increase
the rent so the tenants there’s one bedrooms and two bedrooms so the tenant
was at 6:25 that took over to 725 this one was at 625 and I took them to
700 the apartment sizes vary a little bit this one was at 575 I took him into
650 and 525 to 600 now before you think I’m this even mean person that just
comes in and jacks up friends know that I met personally with every single
tenant okay and introduce myself I’m the new landlord I want to let you know we
run a professional business all your rent is going to be paid online rent
isn’t accepted after the first of the month we have no grace period but in
return we’re gonna like really fix up this building and make it really nice
for you we’re gonna renovate your apartment I mean these tenants have old
wooden doors that any a child could have kicked in like they were like half
rotted they weren’t safe there was a deck on it that wasn’t safe there’s a
lot of it to be changed so I gave the tenants the choice you can stay and your
rents gonna increase by 50 bucks a month until you’re at the rent that it needs
to be at which is market rent or you can give me notice and you can leave it any
time and I’m not gonna hold you to your lease because my thought was if they
leave I’m gonna go in and fully renovate their apartment and get more for it
anyway so it ended up that all the tenant stayed that were there we had one
that was supposed to be moving that still hasn’t moved we have another
apartment that was vacant that we filled that we renovated and we fill so I
didn’t just jack up their rents right away I gave them the option to leave and
I did on a sliding scale so we took our income from two thousand three hundred
fifty a month to two thousand six hundred and seventy five a month but
that’s not the only thing we did okay so we’re just making this building cash
flow better and better and better by raising friends but raising rents
isn’t the only way to make a cash flow better because you’re eventually gonna
cap out we like to be just below market rent and have a nice apartment that’s a
little cheaper than everyone else in the market because then our tenants stay
forever okay it’s a tactic that has worked very well for us and we try to
take really good care of our tenants and they stay a long term we ended up
putting twenty thousand dollars in rehab into the property so we did a lot of
things to make it safer and a lot prettier a lot more appealing we put in
all new windows everything like that I’m going to go over that with you in a
second so other than raising rents I’m gonna hop to our next sheet here and I’m
going to show you guys what we did with expenses to help make the building cash
flow better so now we have our income at thirty two thousand one hundred dollars
a year and these are what our expenses are I have payments to my seller
I have taxes insurance an owners electric meter gas he okay
the building has one gas heater and it heats the whole four unit there are some
landlords that won’t even buy buildings like this because they say no way if I
pay the heat for everyone in the building I’m not buying the building
because you’re paying heat tenants have their windows open so we put clauses in
our lease so that if we drive by and their windows are open in the middle of
the winter they basically like get some sort of like penalty fine for that but
the other thing we did because we pay the gas heat as the landlord the
building had all old windows like buy old
I mean rickety rotted wouldn’t seal all had drafts in the apartment windows they
were really bad we put in like 35 new windows in this building it was a large
expense like half of our rehab costs was just in Windows okay so this gas heat
expense that’s from the old landlord okay
this was his gas heat expense I expect this is the first year we’ve had the
property this will be the first winter that my gas heat expense is going to be
way less than that okay just from putting new windows in
the other thing is the water sewer expenses paid by the landlord and the
Landlord had a washer and dryer I put washer and dryer in sanity he had
a washer and dryer in the basement that was not Queen operated at all and he
pays the water why is that bad because everyone in the buildings doing their
laundry he’s paying to do their laundry he’s basically paying to do his tenants
laundry so we disconnected the washer and dryer if they want to do laundry
there’s a ton of laundromats in the area but until we can get a coin-operated in
there we’re not gonna have a washer/dryer and it’s only four units
it’s not like it’s a huge building so I expect that my water sewer bill is going
to drop significantly too we have an inspection fee a trash feed vacancy
we’re not gonna have near the vacancy he had because of what I told you earlier
we take really good care of our tenants we have a maintenance expense a lawn and
snow expense which is free for the first year because the other great thing about
buying through my top landlord is the seller that is financing it for me lives
near the property and he has the basement full of stuff he was using it
as storage and I asked him to clean it out and he told me he would mow the lawn
and he would clear the snow for the first year if I would give him a year to
clean out the basement so I was like soul coz way cheaper than me pains I’m
going to do it and until I can see how my gas and my water and sewer shake out
it’s nice to know I’m getting that for free then we also factor in capex so
capex is like money you factor in for large expenses for the large things like
roof heater hot water heater stuff like that so we factored in 2,000 a year in
half x and then this is what our expenses come out to okay so we have our
income is I’m taking my income of thirty to one minus my expenses of twenty six
five eighty so our total income net income is five thousand five hundred
twenty-eight year which is four hundred sixty dollars a month is what this
building puts off which is a hundred and fifteen dollars a unit which four
hundred sixty bucks a month it’s better than nothing and I think this is only
gonna get better it’s just gonna cash a little more and more so we’re decreasing
our expenses raising our rents a little bit and the building’s just going to
look better and better better every year every year we’re going to take this two
thousand dollars and we’re gonna put it in towards projects in the built in the
building along with we have a maintenance expense in here so we’re
going to keep making the tenants apartments better and better so the
building’s going to get even better looking attract good quality tenants
that are going to stay in place for a long time and in the end make us more
money so that’s how we did our seller finance for unit thank you guys for
joining us make sure you subscribe to our Channel we’re gonna do a video on
how I’m getting out of this so this seller financed it for me for five years
so five years from now I have to completely pay him off which means I
have to go get a loan with a bank so he’s only holding the financing for five
years so minutes show you a little video breakdown of how I and getting out of
this project in five where’s what my plan is so make sure you subscribe to
our channel click like you can follow us on facebook at lazy girl real estate
investing you can follow us on instagram at april Crossley and you can check out
our website and our courses at WWDC girl rei calm have a great day