How to Negotiate For Owner Financing


Hey what’s going on guys this is Daniel
one half of the clock brothers and in this video we’re gonna be talking about
hot indigo she ate for owner financing so let’s go ahead and cue that intro
let’s get right to it alright guys so today we’re gonna be talking about how
to negotiate for seller financing right so owner financing seller financing
whatever you want to call it right and the OL annoy we call it agreement for
deed but this video we’re gonna be talking about how to negotiate for owner
financing but before we go ahead and talk about the techniques the the tips
and tricks that we could use to negotiate for this acquisition strategy
well we got to understand who we’re negotiating with because at the end of
the day if we’re not providing value for the individual that we’re doing business
with if we’re not creating win-win situations well then what’s the point so
let’s go ahead and talk about some attributes and characteristics that
individuals and sellers may have that incentivize them to do so or financing
that that you know makes owner financing the feasible solution and guys there
have been scenarios to where doing owner financing is not the right way to go
right it’s actually against what they’re trying to accomplish financially so in
those scenarios guys don’t push too hard don’t try and do owner financing do
what’s best for the deal you know I always say for individuals that are very
good at sales very good at negotiations a lot of times that could work against
them because they’re so good at selling they’re so good at negotiating that they
actually pitch an acquisition strategy that actually is terrible for the person
for the seller so let’s go ahead and first talk about the attributes that
make a seller financing that make owner financing feasible that way we can work
up to the greater topic of how to negotiate for owner financing so if
we’re talking about the benefits of owner financing well why do people do
owner financing what are the benefits what are the values that provide now
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cash flow half passive income and live our life okay so we’re talking about the
benefits of owner financing so we’re with owner financing when I think
benefits and owner financing in the same sentence a couple of things that popped
into my mind right out of the gate are tax advantages so we got tax advantages and we also have the continuation of
passive income now what do I mean by that what I mean by the continuation the
passive income is that a lot of the landlords who have owned their building
for you know 15 20 30 years and even the individuals who may not have owned it
for a very long time the reason for getting into the real estate game is
that they want passive income and a lot of individuals will have owned
properties for fifteen twenty thirty years they’re used to getting that
income every single month that they necessarily don’t want it to change so
one of the things that owner financing can do for them is they can continue to
receive income on a monthly basis without needing to manage the property
without needing to deal with the problems without needing to deal with
the city etc etc right you guys can take it from there in terms of the challenges
and adversities of being a landlord so tax advantages passive income right but
also another incentive is the asking price so they get a higher purchase
price because typically with owner financing and compared to cash you
typically can get a higher purchase price for the building as a seller by
offering an incentive like seller financing now it is for you right
because we’re talking about how to negotiate for owner financing it all
fits in one big umbrella of that topic it’s up to you as the buyer to showcase
based on their needs and their problems that it’s actually not incentive for for
you but it’s actually more of an incentive for them right you need to
portray and showcase that value to the point where it’s actually like you’re
doing them a favor like a lot of my negotiations it ends up
that way it actually ends up the fact that it’s more incentivizing financially
for the seller to do owner financing rather than me do it right still good
but these are the three benefits right the three benefits of individuals who
utilize solar financing now that we understand the benefits we now need to
address the people who are the prime candidates who are the prime candidates
for individual who could be very open and incentivized to owner financing so
let’s go ahead and start from the top now let me start off this portion of the
video by saying that well anybody anybody can be a good you know contender
anybody can be a good subject for seller financing it’s just depending on what
they’re looking for so let me give you an example of what I’m talking about and
then I’ll give you guys the prime candidates on who are your target
sellers right you as an individual you as an investor and real estate
entrepreneur who do you need to target for this acquisition strategy called
owner financing so what do I mean that you know owner financing can really work
for anyone let me take two different landlords and show you what I mean let’s
say you got you know twenty-five years old and let’s say this guy you know he
owns other units and once the sell an apartment but you
know he’s sick and tired of dealing with the problems you know and let’s say he
wants to you know get passive income somewhere else so he wants to divest the
building move it into another property but let’s say he wants to do like a
different you know exit strategy so he saw the apartment and he wants to get
into portfolios of single-family houses so I’m just gonna write get different
investment okay and on the other end so like he’s gonna continue to be in the
gain right so he’s gonna continue to work slash invest not let’s look at the
other end of the spectrum let’s take somebody who’s 50 years older than this
25 year old individual now you got somebody who’s 75 years old so he’s
let’s say in this scenario he’s selling his whole portfolio he wants to retire and he wants to
travel all right he or she could be anyone right they want to travel and
they want to have more freedom you know and enjoy time with family and I’m sure
you guys have home watching this video you guys would agree that that is the
case for a lot of individuals around that age range right whether it’s 60s
70s you know a lot of owners a lot of landlords that are looking to retire and
get out of their portfolio or divest or portfolio a lot of them are in their 70s
you know they still work in their 60s and whatnot so they want to travel they
want to retire they want to you know sell the whole portfolio right plainly
plain and simple now based on these two guys is completely different demands and
where there are in life you can structure the terms of owner financing
so when you’re negotiating 400 financing you could structure the different terms
because one of the beautiful things that when our finance or provides is the
flexibility it’s the freedom for you to be able to choose your own terms right
if you were to go to a bank right you’re gonna take the terms the banks give you
they’re gonna look at your financial statement they’re gonna look at you know
your financial assets your your tax return and they’re gonna say okay based
on your liquidity level your wealth and also your experience and real estate
investing we’re gonna give you five point three percent we’re gonna give you
thirty year amortization we’re gonna give you a nine year balloon we’re gonna
give you this percent down right and the higher the risk they’re gonna ask you to
put more down so when I go to the bank they ask for twenty percent if you know
somebody who’s just starting out in real estate goes to the bank most likely
they’ll ask for 25 or 30 percent because they want more money upfront because
they have to assess more of the risk cuz they don’t know as much what they’re
doing compared to somebody like myself you know who’s done a lot of different
real estate transactions so what I like about owner financing and the incentive
to learning how to negotiate for owner financing is that it gives you the
flexibility to choose your own terms now for those of you guys that don’t know
what I’m referring to when I say the word terms I mean stuff like the down
payment right in terms of financing so terms of financing so we got down
payment we have interest rate we have the loan amount rights of the loan years
so how long is the long go for is it a 15-year at more a 20-year 25-year you
know 30-year I’ve actually seen some some notes icon forty years so I have
seen forty year mortgages before and also something I brought up before is a
balloon but that’s something that I usually do not bring up in my
negotiation for seller financing so you know what I’m negotiating for financing
a balloon is something that I really don’t bring up unless it actually is
fitting to the seller and typically if it is fitting to the seller I’ll ask for
something in return to benefit me right like a lower interest rate
okay so flexibility that’s what it gives me now this flexibility allows me to to
accommodate and really mold to two different audience groups here and when
we’re learning how to negotiate for owner financing the most important thing
that we must consider when we’re going into the negotiation is who are we
talking to just like a stand-up comedian who’s gonna go up on stage they need to
know your audience right already public speaker or anybody that you’re even a
pastor you know my dad is a pastor and I’ve met a lot of different pastors in
my life and one of the things that they commonly say is well you know you gotta
know what issues people are dealing with we know we can’t preach and we can’t you
know preach the Word of God and preach love and great unless we know what
people are charr facing what’s their adversity so you got to know your
audience right so let’s say we got to different audiences here now we could
use the flexibility of the terms to accommodate two completely different
groups so you got a guy here who is 25 years old he’s gonna continue to work
and invest he wants to get into a different investment to increase the
passive income and let’s say that he wants liquidity let’s say this 25 year
old is getting married in three months just out of just a hypothetical example
right let’s say the 25 year old you know he’s getting married he could use some
liquidity he wants to pay for his honeymoon etc etc etc
now here’s what we can do here we could give him a high down payment in exchange
we could use that to negotiate a lower interest rate because we’re giving
something that’s important to him right so he needs a little itty to pay for his
wedding to pay you know etc etc right and at the same time we still give him a
interest rate and let’s say we give him you know like a 20 or you know a 15 year
amortization now the reason why I make the amortization so small is because
well the smaller the amortization the the shorter the loan amount the higher
the payment so now he does not have to go out and get a different investment
that also solves the problem of him having to deal with the issues of the
tenant cuz that’s why he wanted to sell he wants to sell because he’s sick and
tired of dealing with the problems as we stated earlier right and guess what he
owns other units so there’s a possibility that he may want to do this
with the other units he owns or another opportunity is that it now gives him
time so because he’s getting passive income through a larger or I’m sorry
through a shorter loan period small interest he’s getting a payment every
single month without having to deal with the problems cuz me as the buyer I’m
handling the problems so he is able to to sell his apartment continue to get
passive income right passive income in a more pure form all right it still allows
him to do what he wants to do you know and now it gives him also more time to
focus on his other units or focus on deals that he wants to do as well and
the high down payment which a high down payment in this scenario would be 20 to
30% it gives him the liquidity to be able to do what he wants today so do you
guys see how based on the flexibility and negotiating phone or financing we
could address every single pieces of his issues and this is gonna be really key
especially when we’re talking about you know what is the overall grand scheme
what is the overall equation now let’s move on to the seventy-five-year-old
well the 75 year old has completely different set of agenda he doesn’t want
to continue to work he wants to sell his whole portfolio
rather than still owning other units and he wants to retire you know he’s not
gonna continue to work like the 25 year old is he’s gonna he’s gonna want to
continue to travel he wants the freedom you know and let’s say that he does not
need the liquidity he doesn’t need it because well after 75 years he’s managed
to have quite a bit saved up and you know in many cases where I go she ate
with sellers that are in there you know late 40s 50s 60s and especially 70s they
have a bunch of liquidity in their bank account because that’s their life
savings that they saved it up their whole life so in this case scenario
let’s talk about what we can do to service our audience to service our
seller so to speak so in this case scenario I’m gonna give them a low
downpayment because why he doesn’t need the liquidity right now right so we can
go 0% down the 10% down that’s something I would kind of refer to as a low
downpayment now the reason why I still say 10 is because a lot of times sellers
still want you to have you know some skin in the game you know they want you
to have some investment in there that way you’re not just you know running
away you know now I have bought buildings before no money down I’ve had
buildings where I had literally bought it with no money out of my pocket you
know I was able to go to the closing table I owe zero money I had to make no
wire transfers whatsoever and I also didn’t get my credit checked so low
downpayment because they don’t need the liquidity right now we could also give
them a decent interest rate and I always try and stay away from giving high
interest rates so I consider a high interest rate you know five six seven
percent anything I could get at the bank I consider a high interest rate you know
because if I could if I can get that at the bank why would I why would I do this
right there needs to be some incentive it needs to be a win-win right when for
that person but also went for me so interest rate let’s say I give him three
to four percent which is what I usually do and that three four percent and also
the loan years so I’m gonna put in a thirty right so I’m gonna do anywhere
between twenty five to thirty year amortization the
well you know if he’s seven years old right we want to be able to take care of
him for quite a while you know we want him to be continued to get payments for
a long time because he wants to travel and he wants to retire right therefore
we need to give him the the amount of time needed for him to be able to do
that so to speak so we’re gonna give the interest we’re gonna give him a loan
amount of 30 years that’s gonna give him passive income every single day the down
payment takes care of him already having that liquidity and keep in mind guys to
lower that down payment the higher the monthly payment every single month
that’s what they want idea that they did that is the security that somebody of
this crowd of this audience is going to be looking for the 25 year old may not
be interested in that high monthly payment he may not be because he’s
already gone other units if anything he could probably use it for the tax
advantages as well because he’s gonna continue to do business he probably
doesn’t have a whole lot of losses to carry forward right whereas the
individual on the right the 75 year old that may not be the case that may not be
the case at all so if anything were able to sell his
whole portfolio no problems we’re still able to give him a higher purchase price
and we were able to address and solve all his problems now this is a small
part of overall what we’re talking about so let’s get into the main aspect of how
to negotiate for owner financing so we know our audience now we need to know
the structure we need to know the system what are the steps what are the action
steps that we need to do to properly negotiate for owner financing so here’s
how I do it I find the people and guys quick little detour I want to
say if you’re struggling to look for properties you know what the best way to
look for properties is is look for people if you look for people you will
get the properties 100% of the time so we get the people we identified their
problems oops I suppose that’s wrong that’s a
problem yeah that’s a problem my spelling is a problem so we got the
people to get the problems and from the problems calm the solution from the
solution we could then provide the value and after it provides a value that
always leads us to money and cash flow I mean think about the companies in the
world that provide the most value right even apple they’re providing you value
you’re probably watching this you know video on your cell phone right so
whether it be Samsung or Apple I prefer Samsung but on a Samsung Apple
whatever it may be you know you’re watching this video off the cellphone
that a company provided value with so you exchange that value you gave them
money right and nowadays smartphones like $2,000 right you gave them $1,000
or however much you pay for the phone in exchange for the value to give you in
the form of a phone in the form of a cell phone
so people problem-solution value cash flow and in terms of what we just did in
terms of my debt that’s identifying the people and
because we identified the people we can then talk about their problem what is
their problem you know and we do that in many different ways we do it in the form
of asking questions right so we got to ask the questions because unless we’re
asking questions we’re not gonna have the answers and oftentimes the greatest
answers are the questions in life especially so when we’re talking about
you know talking to a seller we’re learning how to negotiate I actually
spend the first 15 to 20 minutes just asking questions so if you guys want to
know my negotiation process here it is so I first ask questions right and you know before right there’s
a lot of prep and you know maybe how to prep for owner financing negotiation is
another video we can make another day but I also prep you know I build rapport you know so we talk we connect and a lot
of times I’m reading their personalities and what do I mean by reading well I’m
talking about I’m learning what motivates them where are they driven by
are they driven by money are they driven by freedom or are they driven by wanting
to learn more about this world are they you know driven by you know and how do
they react what is their personality type how did that what is their style of
negotiation are they the individual that would just sit back and want you to talk
or are they the individual that lean forward and try and control the
conversation so I try and read a lot of who they are what are they driven by
what’s their motivation and what is their style of negotiation that allows
me to figure out how I need to address that person how do I obtain the social
control in the conversation so after that I ask a lot of questions now what
questions do I ask I ask questions like why are you selling and what I’m really
trying to figure out with a lot of these questions is you know what is the
problem at stake here what can what what problems could I provide solution for so
I could provide the value so I can make more money all right so why are you
selling and I actually asked this question three times total I asked it at
first it’s the first question that I ask and then typically a lot of sellers
ninety-nine percent of the time will try and hype up their building right they’ll
call through building a cash cow and they’ll say oh yeah well we just got the
new roofs done we just put it in a new furnace I mean don’t turn every negative
into a positive ideals like there’s a nice little family of rats that just
moved in you know like it’s great for the whole community
like don’t literally say anything to make their value of the properties seem
higher than what it actually is to which I respond great
mr. seller if it’s that great if it’s that amazing you know if the building is
that well taken care of and if it is a cash cow
then why are you selling and I’ll do it for many different reasons I’ll do it
with financial reasons I’ll do it for emotional reasons the emotional reason
would be well you know I had this building for 20 years I had this
building for 25 years I used this building to pay for my daughter’s
college and tuition and to which I again respond if it’s that awesome if it’s
done so many great things for you in your life why are you selling and a lot
of times that gives me the answer and the answer sometimes may be well you
know I want to move down you know to like Florida or I want to retire or you
know I’ve dealt with this building for far too long and as soon as I’m getting
these problems I’m making mental notes in my brain on what is important to them
what is important to them and what do they want out of this scenario matter of
fact that’s another question that I ask right so in a perfect world all right so
in a perfect world what would happen in this in in this transaction all right in
a perfect world how would this deal turn out right and typically I frame that
question by repeating their problems back to them so that way is still fresh
in their mind and they’re using it so I’ll say stuff like well mr. seller you
told me that you wanted to retire you know you want to spend more time with
family that you know you’d like the passive income so you may you know
invest in something else if you see it so I mean considering all those things
considering all the adversities that you’re facing all the obstacles that
you’re looking at currently in a perfect world what would happen and of course
their answer would be well you know I would you know I’d saw the building it’d
be able to retire you know and somebody would give me a cash offer right and
this is where I go ahead and break it down so I start asking questions and I
start providing right I ask questions identify the problems this is where I’ll
start saying stuff like well here’s the problem mr. seller you know you want to
sell this building for 1 million and you’re gonna get taxed you know on your
you know you’re gonna pay 350 million dollars in taxes you’re gonna pay your
I’m sorry not 350 350 thousand all right so you’re gonna pay 350 dollars in the
taxes because you know you have ordinary income tax and capital gain tax and you
know on top of it you’re gonna pay $50,000 in closing costs and whatnot and
you know and so at the end of the day you you actually might only walk away
with $600,000 and you know I don’t know how much you owe on your remaining
mortgage but you know you you may walk away with nothing if anything you may
have to bring money to the closing table or you may only walk out of here with a
hundred and two hundred thousand dollars that’s what would happen you know if I
were to offer you all cash fine I mean that’s if I offered you a million
dollars right my offer is not gonna be a million because you know if I’m making a
cash offer obviously there’s gonna be some sort of a discount but even in the
best-case scenario where I do give you the $1,000,000 unfortunately you’re only
gonna walk away with you know six hundred thousand now I do have another
way that you could actually make probably double the money so what you
can do for me is I’ll buy it off you for a million so if you want to go this
route you could definitely offer you’ll definitely get the 1 million dollars but
you know based on what you’ve told me so far in terms of you wanting to retire
what if I just gave you money every single month right what if you were to
finance me so let’s say I gave you like 4 percent
you know 20-year amortization you know and let’s say I give you a down payment
of some sorts right and depending on how much money you have the bank account
right now I can give you a lot I can give you a little you know if I get 20%
and I’ll probably just go to a bank and just go with this route you know thus
only you having you walk away with a hundred two hundred thousand dollars if
you if you owe something if not you’re only gonna walk away with sixty percent
of what I offer you but you know down payment you know let’s go with 10
percent for now you know so in this scenario 4 percent of 1 million dollars
is 40,000 so you would actually be getting an extra $40,000 a year just for
financing me and guys I don’t have a mortgage calculator right now but let’s
say for the hypothetical situation you know the payment that you make is payment you make every year as $50,000 a
year all right so which I would say all right
well so was interest in principle I can give you you know that every single year
and I believe right so correct me if I’m wrong I’m just doing this kind of off
quick math but I believe that after the twenty years or even the thirty years
you should pay the seller a total of 1.6 million dollars through the span of that
20 years so in this case I would draw it out and I’d say sir would you rather
want six hundred thousand dollars for one point six million dollars and I
usually get a sheet of paper I draw it right down the middle and I showcase
these two things so identify the problem right through this this is the problem
the problem is that if I were to go about it with the way he wants to go
about it he would walk away with less money but this is where I start
identifying the solution so I ask the question identify the problem and then
introduce the solution in the form of owner financing so you’re negotiating in
a way where you’re almost acting like a consultant you’re helping them out
you’re listening to what they have to say and you’re addressing it and you’re
making them feel heard in negotiation right you always want to be the person
that’s talking less right if anything you want them to talk more all the time
matter of fact at the end of me negotiating all right one of the things
that I commonly do is I ask them hey you know what’s the one thing that would
make this deal better for you you know like what is the one thing that would
make the deal better for you and a lot of times they say a higher down payment
because for some reason people want their money and they want it now so a
lot of times I’ll say great how about I attack on an extra an extra two and a
half percent on that down payment so that’s an extra $25,000 but in exchange
instead of four percent we could do three and a half right we’re not reality
if you do the math I make way more money and build much more principle by doing
three and a half instead of the four so again guys that’s kind of out you know
me in a nutshell in terms of how I negotiate for owner financing I hope
this helps you in terms of you negotiate for owner financing we actually do have
a free course on owner financing that we make available it’s actually a much long
course about an hour and a half it’s about 60 to 90 minutes and
much longer than this video and we actually get a little bit more in depth
on how we actually structure owner financing and what it actually even is
we also have a CPA in that class that talks about all the tax implications so
if you’re interested click on the link below it’s completely free you don’t
have to pay anything it’s a free class on owner financing so feel free to click
on the link in the description below and as always subscribe and click on that
notification bell we’re always looking to add new content to our page to
ultimately serve and bring value to you guys so thank you guys for watching this
video I hope this helped hope this brought more clarity again I love you
guys always praying for you thank you for being part of the clock for this
family I’ll see you guys in the next video

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