I don’t ask banks for loans or permission to close on real estate transactions… and I’ve never had all cash. All purchases since 1998 have been financed by the seller, and once in a rare while, a private money partner.
My last bank loan was when we bought our first house in 1998, and since then I’ve drawn a line in the sand… it’s just not on the table for consideration.
And apparently I treat it like a badge of honor! 🤓 cuz I bring it up every chance I get when I want to make poignant the message that there’s a parallel universe of private solutions out there.
You just need to learn how to tune in to the right dimensional frequency.
Banks make loans, sell those loans to Fannie Mae and Freddie Mac at a premium, and use the proceeds to make more loans (work with me here for illustration purposes… I know that fractional reserve banking allows institutions to make loans out of thin air).
That keeps the machine running around. Real estate buyers get to keep buying, sellers get to keep selling.
In the private system when a seller ‘carries the paper’ / ‘offers terms’ to a buyer, often they don’t plan to sell the note.
Partly because they don’t even know they can until they start getting letters and postcards in the mail, but more importantly because:
- It helps them sell quickly and easily for the highest possible price
- They can defer most of their capital gains with IRC 453, the Installment Sale
- They get income for retirement that is usually nearly double what they were netting from rent
- They leave a great inheritance for their children…juicy mailbox money
- They can raise liquidity (CASH) if/when they need it by selling off payments of the note… their ‘real estate annuity.’
Who will buy those payments?
Why, a private Fannie, of course! (or if male, a private Freddie 😂). Someone who buys discounted seller carry notes… a ‘note investor.’
That keeps the private money system churning around, providing an ‘out’ for note holders (or their heirs) that want/need a lump sum more than a steady stream of income.
When someone offers owner financing because they had to in order to get the property sold, they are likely to be good candidates for selling their note.
If we can get to the transaction BEFORE the terms are inked, we can reverse engineer them to optimize the financial outcome for the seller.
Seller financing and ‘the note business’, when properly understood and implemented, create a full circle private paradigm that makes the wealth vampires in Washington & Wall Street optional.
Join me for the next Property & Paper LIVE!
These are free ‘mastermind’ zoom sessions hosted on the 1st & 3rd Tuesdays of every month where we meet together so you can get your questions answered about seller financed real estate and note investing. Full replays are hosted in the Citizens of the Realm community, and you can directly access the Event calendar. Free to join!