How to Negotiate For Owner Financing

Hey what's going on guys this is Danielone half of the clock brothers and in this video we're gonna be talking abouthot indigo she ate for owner financing so let's go ahead and cue that introlet's get right to it alright guys so today we're gonna be talking about howto negotiate for seller financing right so owner financing seller financingwhatever you want to call it right and the OL annoy we call it agreement fordeed but this video we're gonna be talking about how to negotiate for ownerfinancing but before we go ahead and talk about the techniques the the tipsand tricks that we could use to negotiate for this acquisition strategywell we got to understand who we're negotiating with because at the end ofthe day if we're not providing value for the individual that we're doing businesswith if we're not creating win-win situations well then what's the point solet's go ahead and talk about some attributes and characteristics thatindividuals and sellers may have that incentivize them to do so or financingthat that you know makes owner financing the feasible solution and guys therehave been scenarios to where doing owner financing is not the right way to goright it's actually against what they're trying to accomplish financially so inthose scenarios guys don't push too hard don't try and do owner financing dowhat's best for the deal you know I always say for individuals that are verygood at sales very good at negotiations a lot of times that could work againstthem because they're so good at selling they're so good at negotiating that theyactually pitch an acquisition strategy that actually is terrible for the personfor the seller so let's go ahead and first talk about the attributes thatmake a seller financing that make owner financing feasible that way we can workup to the greater topic of how to negotiate for owner financing so ifwe're talking about the benefits of owner financing well why do people doowner financing what are the benefits what are the values that provide nowbefore we get and get too deep into the content I want to remind you guys toclick that subscribe button and also click on that notification though we'reactually this summer we're you know making a giant push to put out much morereal estate investing content and more specific real estate investing contentsuch as hot indigo shape for owner financingso click on that notification balance that way you can be the first to watchthe video and actually use it out there in the real world so that we can collectcash flow half passive income and live our life okay so we're talking about thebenefits of owner financing so we're with owner financing when I thinkbenefits and owner financing in the same sentence a couple of things that poppedinto my mind right out of the gate are tax advantages so we got tax advantages and we also have the continuation ofpassive income now what do I mean by that what I mean by the continuation thepassive income is that a lot of the landlords who have owned their buildingfor you know 15 20 30 years and even the individuals who may not have owned itfor a very long time the reason for getting into the real estate game isthat they want passive income and a lot of individuals will have ownedproperties for fifteen twenty thirty years they're used to getting thatincome every single month that they necessarily don't want it to change soone of the things that owner financing can do for them is they can continue toreceive income on a monthly basis without needing to manage the propertywithout needing to deal with the problems without needing to deal withthe city etc etc right you guys can take it from there in terms of the challengesand adversities of being a landlord so tax advantages passive income right butalso another incentive is the asking price so they get a higher purchaseprice because typically with owner financing and compared to cash youtypically can get a higher purchase price for the building as a seller byoffering an incentive like seller financing now it is for you rightbecause we're talking about how to negotiate for owner financing it allfits in one big umbrella of that topic it's up to you as the buyer to showcasebased on their needs and their problems that it's actually not incentive for foryou but it's actually more of an incentive for them right you need toportray and showcase that value to the point where it's actually like you'redoing them a favor like a lot of my negotiations it ends upthat way it actually ends up the fact that it's more incentivizing financiallyfor the seller to do owner financing rather than me do it right still goodbut these are the three benefits right the three benefits of individuals whoutilize solar financing now that we understand the benefits we now need toaddress the people who are the prime candidates who are the prime candidatesfor individual who could be very open and incentivized to owner financing solet's go ahead and start from the top now let me start off this portion of thevideo by saying that well anybody anybody can be a good you know contenderanybody can be a good subject for seller financing it's just depending on whatthey're looking for so let me give you an example of what I'm talking about andthen I'll give you guys the prime candidates on who are your targetsellers right you as an individual you as an investor and real estateentrepreneur who do you need to target for this acquisition strategy calledowner financing so what do I mean that you know owner financing can really workfor anyone let me take two different landlords and show you what I mean let'ssay you got you know twenty-five years old and let's say this guy you know heowns other units and once the sell an apartment but youknow he's sick and tired of dealing with the problems you know and let's say hewants to you know get passive income somewhere else so he wants to divest thebuilding move it into another property but let's say he wants to do like adifferent you know exit strategy so he saw the apartment and he wants to getinto portfolios of single-family houses so I'm just gonna write get differentinvestment okay and on the other end so like he's gonna continue to be in thegain right so he's gonna continue to work slash invest not let's look at theother end of the spectrum let's take somebody who's 50 years older than this25 year old individual now you got somebody who's 75 years old so he'slet's say in this scenario he's selling his whole portfolio he wants to retire and he wants totravel all right he or she could be anyone right they want to travel andthey want to have more freedom you know and enjoy time with family and I'm sureyou guys have home watching this video you guys would agree that that is thecase for a lot of individuals around that age range right whether it's 60s70s you know a lot of owners a lot of landlords that are looking to retire andget out of their portfolio or divest or portfolio a lot of them are in their 70syou know they still work in their 60s and whatnot so they want to travel theywant to retire they want to you know sell the whole portfolio right plainlyplain and simple now based on these two guys is completely different demands andwhere there are in life you can structure the terms of owner financingso when you're negotiating 400 financing you could structure the different termsbecause one of the beautiful things that when our finance or provides is theflexibility it's the freedom for you to be able to choose your own terms rightif you were to go to a bank right you're gonna take the terms the banks give youthey're gonna look at your financial statement they're gonna look at you knowyour financial assets your your tax return and they're gonna say okay basedon your liquidity level your wealth and also your experience and real estateinvesting we're gonna give you five point three percent we're gonna give youthirty year amortization we're gonna give you a nine year balloon we're gonnagive you this percent down right and the higher the risk they're gonna ask you toput more down so when I go to the bank they ask for twenty percent if you knowsomebody who's just starting out in real estate goes to the bank most likelythey'll ask for 25 or 30 percent because they want more money upfront becausethey have to assess more of the risk cuz they don't know as much what they'redoing compared to somebody like myself you know who's done a lot of differentreal estate transactions so what I like about owner financing and the incentiveto learning how to negotiate for owner financing is that it gives you theflexibility to choose your own terms now for those of you guys that don't knowwhat I'm referring to when I say the word terms I mean stuff like the downpayment right in terms of financing so terms of financing so we got downpayment we have interest rate we have the loan amount rights of the loan yearsso how long is the long go for is it a 15-year at more a 20-year 25-year youknow 30-year I've actually seen some some notes icon forty years so I haveseen forty year mortgages before and also something I brought up before is aballoon but that's something that I usually do not bring up in mynegotiation for seller financing so you know what I'm negotiating for financinga balloon is something that I really don't bring up unless it actually isfitting to the seller and typically if it is fitting to the seller I'll ask forsomething in return to benefit me right like a lower interest rateokay so flexibility that's what it gives me now this flexibility allows me to toaccommodate and really mold to two different audience groups here and whenwe're learning how to negotiate for owner financing the most important thingthat we must consider when we're going into the negotiation is who are wetalking to just like a stand-up comedian who's gonna go up on stage they need toknow your audience right already public speaker or anybody that you're even apastor you know my dad is a pastor and I've met a lot of different pastors inmy life and one of the things that they commonly say is well you know you gottaknow what issues people are dealing with we know we can't preach and we can't youknow preach the Word of God and preach love and great unless we know whatpeople are charr facing what's their adversity so you got to know youraudience right so let's say we got to different audiences here now we coulduse the flexibility of the terms to accommodate two completely differentgroups so you got a guy here who is 25 years old he's gonna continue to workand invest he wants to get into a different investment to increase thepassive income and let's say that he wants liquidity let's say this 25 yearold is getting married in three months just out of just a hypothetical exampleright let's say the 25 year old you know he's getting married he could use someliquidity he wants to pay for his honeymoon etc etc etcnow here's what we can do here we could give him a high down payment in exchangewe could use that to negotiate a lower interest rate because we're givingsomething that's important to him right so he needs a little itty to pay for hiswedding to pay you know etc etc right and at the same time we still give him ainterest rate and let's say we give him you know like a 20 or you know a 15 yearamortization now the reason why I make the amortization so small is becausewell the smaller the amortization the the shorter the loan amount the higherthe payment so now he does not have to go out and get a different investmentthat also solves the problem of him having to deal with the issues of thetenant cuz that's why he wanted to sell he wants to sell because he's sick andtired of dealing with the problems as we stated earlier right and guess what heowns other units so there's a possibility that he may want to do thiswith the other units he owns or another opportunity is that it now gives himtime so because he's getting passive income through a larger or I'm sorrythrough a shorter loan period small interest he's getting a payment everysingle month without having to deal with the problems cuz me as the buyer I'mhandling the problems so he is able to to sell his apartment continue to getpassive income right passive income in a more pure form all right it still allowshim to do what he wants to do you know and now it gives him also more time tofocus on his other units or focus on deals that he wants to do as well andthe high down payment which a high down payment in this scenario would be 20 to30% it gives him the liquidity to be able to do what he wants today so do youguys see how based on the flexibility and negotiating phone or financing wecould address every single pieces of his issues and this is gonna be really keyespecially when we're talking about you know what is the overall grand schemewhat is the overall equation now let's move on to the seventy-five-year-oldwell the 75 year old has completely different set of agenda he doesn't wantto continue to work he wants to sell his whole portfoliorather than still owning other units and he wants to retire you know he's notgonna continue to work like the 25 year old is he's gonna he's gonna want tocontinue to travel he wants the freedom you know and let's say that he does notneed the liquidity he doesn't need it because well after 75 years he's managedto have quite a bit saved up and you know in many cases where I go she atewith sellers that are in there you know late 40s 50s 60s and especially 70s theyhave a bunch of liquidity in their bank account because that's their lifesavings that they saved it up their whole life so in this case scenariolet's talk about what we can do to service our audience to service ourseller so to speak so in this case scenario I'm gonna give them a lowdownpayment because why he doesn't need the liquidity right now right so we cango 0% down the 10% down that's something I would kind of refer to as a lowdownpayment now the reason why I still say 10 is because a lot of times sellersstill want you to have you know some skin in the game you know they want youto have some investment in there that way you're not just you know runningaway you know now I have bought buildings before no money down I've hadbuildings where I had literally bought it with no money out of my pocket youknow I was able to go to the closing table I owe zero money I had to make nowire transfers whatsoever and I also didn't get my credit checked so lowdownpayment because they don't need the liquidity right now we could also givethem a decent interest rate and I always try and stay away from giving highinterest rates so I consider a high interest rate you know five six sevenpercent anything I could get at the bank I consider a high interest rate you knowbecause if I could if I can get that at the bank why would I why would I do thisright there needs to be some incentive it needs to be a win-win right when forthat person but also went for me so interest rate let's say I give him threeto four percent which is what I usually do and that three four percent and alsothe loan years so I'm gonna put in a thirty right so I'm gonna do anywherebetween twenty five to thirty year amortization thewell you know if he's seven years old right we want to be able to take care ofhim for quite a while you know we want him to be continued to get payments fora long time because he wants to travel and he wants to retire right thereforewe need to give him the the amount of time needed for him to be able to dothat so to speak so we're gonna give the interest we're gonna give him a loanamount of 30 years that's gonna give him passive income every single day the downpayment takes care of him already having that liquidity and keep in mind guys tolower that down payment the higher the monthly payment every single monththat's what they want idea that they did that is the security that somebody ofthis crowd of this audience is going to be looking for the 25 year old may notbe interested in that high monthly payment he may not be because he'salready gone other units if anything he could probably use it for the taxadvantages as well because he's gonna continue to do business he probablydoesn't have a whole lot of losses to carry forward right whereas theindividual on the right the 75 year old that may not be the case that may not bethe case at all so if anything were able to sell hiswhole portfolio no problems we're still able to give him a higher purchase priceand we were able to address and solve all his problems now this is a smallpart of overall what we're talking about so let's get into the main aspect of howto negotiate for owner financing so we know our audience now we need to knowthe structure we need to know the system what are the steps what are the actionsteps that we need to do to properly negotiate for owner financing so here'show I do it I find the people and guys quick little detour I want tosay if you're struggling to look for properties you know what the best way tolook for properties is is look for people if you look for people you willget the properties 100% of the time so we get the people we identified theirproblems oops I suppose that's wrong that's aproblem yeah that's a problem my spelling is a problem so we got thepeople to get the problems and from the problems calm the solution from thesolution we could then provide the value and after it provides a value thatalways leads us to money and cash flow I mean think about the companies in theworld that provide the most value right even apple they're providing you valueyou're probably watching this you know video on your cell phone right sowhether it be Samsung or Apple I prefer Samsung but on a Samsung Applewhatever it may be you know you're watching this video off the cellphonethat a company provided value with so you exchange that value you gave themmoney right and nowadays smartphones like $2,000 right you gave them $1,000or however much you pay for the phone in exchange for the value to give you inthe form of a phone in the form of a cell phoneso people problem-solution value cash flow and in terms of what we just did interms of my debt that's identifying the people andbecause we identified the people we can then talk about their problem what istheir problem you know and we do that in many different ways we do it in the formof asking questions right so we got to ask the questions because unless we'reasking questions we're not gonna have the answers and oftentimes the greatestanswers are the questions in life especially so when we're talking aboutyou know talking to a seller we're learning how to negotiate I actuallyspend the first 15 to 20 minutes just asking questions so if you guys want toknow my negotiation process here it is so I first ask questions right and you know before right there'sa lot of prep and you know maybe how to prep for owner financing negotiation isanother video we can make another day but I also prep you know I build rapport you know so we talk we connect and a lotof times I'm reading their personalities and what do I mean by reading well I'mtalking about I'm learning what motivates them where are they driven byare they driven by money are they driven by freedom or are they driven by wantingto learn more about this world are they you know driven by you know and how dothey react what is their personality type how did that what is their style ofnegotiation are they the individual that would just sit back and want you to talkor are they the individual that lean forward and try and control theconversation so I try and read a lot of who they are what are they driven bywhat's their motivation and what is their style of negotiation that allowsme to figure out how I need to address that person how do I obtain the socialcontrol in the conversation so after that I ask a lot of questions now whatquestions do I ask I ask questions like why are you selling and what I'm reallytrying to figure out with a lot of these questions is you know what is theproblem at stake here what can what what problems could I provide solution for soI could provide the value so I can make more money all right so why are youselling and I actually asked this question three times total I asked it atfirst it's the first question that I ask and then typically a lot of sellersninety-nine percent of the time will try and hype up their building right they'llcall through building a cash cow and they'll say oh yeah well we just got thenew roofs done we just put it in a new furnace I mean don't turn every negativeinto a positive ideals like there's a nice little family of rats that justmoved in you know like it's great for the whole communitylike don't literally say anything to make their value of the properties seemhigher than what it actually is to which I respond greatmr.

seller if it's that great if it's that amazing you know if the building isthat well taken care of and if it is a cash cowthen why are you selling and I'll do it for many different reasons I'll do itwith financial reasons I'll do it for emotional reasons the emotional reasonwould be well you know I had this building for 20 years I had thisbuilding for 25 years I used this building to pay for my daughter'scollege and tuition and to which I again respond if it's that awesome if it'sdone so many great things for you in your life why are you selling and a lotof times that gives me the answer and the answer sometimes may be well youknow I want to move down you know to like Florida or I want to retire or youknow I've dealt with this building for far too long and as soon as I'm gettingthese problems I'm making mental notes in my brain on what is important to themwhat is important to them and what do they want out of this scenario matter offact that's another question that I ask right so in a perfect world all right soin a perfect world what would happen in this in in this transaction all right ina perfect world how would this deal turn out right and typically I frame thatquestion by repeating their problems back to them so that way is still freshin their mind and they're using it so I'll say stuff like well mr.

seller youtold me that you wanted to retire you know you want to spend more time withfamily that you know you'd like the passive income so you may you knowinvest in something else if you see it so I mean considering all those thingsconsidering all the adversities that you're facing all the obstacles thatyou're looking at currently in a perfect world what would happen and of coursetheir answer would be well you know I would you know I'd saw the building it'dbe able to retire you know and somebody would give me a cash offer right andthis is where I go ahead and break it down so I start asking questions and Istart providing right I ask questions identify the problems this is where I'llstart saying stuff like well here's the problem mr.

seller you know you want tosell this building for 1 million and you're gonna get taxed you know on youryou know you're gonna pay 350 million dollars in taxes you're gonna pay yourI'm sorry not 350 350 thousand all right so you're gonna pay 350 dollars in thetaxes because you know you have ordinary income tax and capital gain tax and youknow on top of it you're gonna pay $50,000 in closing costs and whatnot andyou know and so at the end of the day you you actually might only walk awaywith $600,000 and you know I don't know how much you owe on your remainingmortgage but you know you you may walk away with nothing if anything you mayhave to bring money to the closing table or you may only walk out of here with ahundred and two hundred thousand dollars that's what would happen you know if Iwere to offer you all cash fine I mean that's if I offered you a milliondollars right my offer is not gonna be a million because you know if I'm making acash offer obviously there's gonna be some sort of a discount but even in thebest-case scenario where I do give you the $1,000,000 unfortunately you're onlygonna walk away with you know six hundred thousand now I do have anotherway that you could actually make probably double the money so what youcan do for me is I'll buy it off you for a million so if you want to go thisroute you could definitely offer you'll definitely get the 1 million dollars butyou know based on what you've told me so far in terms of you wanting to retirewhat if I just gave you money every single month right what if you were tofinance me so let's say I gave you like 4 percentyou know 20-year amortization you know and let's say I give you a down paymentof some sorts right and depending on how much money you have the bank accountright 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 thusonly you having you walk away with a hundred two hundred thousand dollars ifyou if you owe something if not you're only gonna walk away with sixty percentof what I offer you but you know down payment you know let's go with 10percent for now you know so in this scenario 4 percent of 1 million dollarsis 40,000 so you would actually be getting an extra $40,000 a year just forfinancing me and guys I don't have a mortgage calculator right now but let'ssay for the hypothetical situation you know the payment that you make is payment you make every year as $50,000 ayear all right so which I would say all rightwell so was interest in principle I can give you you know that every single yearand I believe right so correct me if I'm wrong I'm just doing this kind of offquick math but I believe that after the twenty years or even the thirty yearsyou should pay the seller a total of 1.

6 million dollars through the span of that20 years so in this case I would draw it out and I'd say sir would you ratherwant six hundred thousand dollars for one point six million dollars and Iusually get a sheet of paper I draw it right down the middle and I showcasethese two things so identify the problem right through this this is the problemthe problem is that if I were to go about it with the way he wants to goabout it he would walk away with less money but this is where I startidentifying the solution so I ask the question identify the problem and thenintroduce the solution in the form of owner financing so you're negotiating ina way where you're almost acting like a consultant you're helping them outyou're listening to what they have to say and you're addressing it and you'remaking them feel heard in negotiation right you always want to be the personthat's talking less right if anything you want them to talk more all the timematter of fact at the end of me negotiating all right one of the thingsthat I commonly do is I ask them hey you know what's the one thing that wouldmake this deal better for you you know like what is the one thing that wouldmake the deal better for you and a lot of times they say a higher down paymentbecause for some reason people want their money and they want it now so alot of times I'll say great how about I attack on an extra an extra two and ahalf percent on that down payment so that's an extra $25,000 but in exchangeinstead of four percent we could do three and a half right we're not realityif you do the math I make way more money and build much more principle by doingthree and a half instead of the four so again guys that's kind of out you knowme in a nutshell in terms of how I negotiate for owner financing I hopethis helps you in terms of you negotiate for owner financing we actually do havea free course on owner financing that we make available it's actually a much longcourse about an hour and a half it's about 60 to 90 minutes andmuch longer than this video and we actually get a little bit more in depthon how we actually structure owner financing and what it actually even iswe also have a CPA in that class that talks about all the tax implications soif you're interested click on the link below it's completely free you don'thave to pay anything it's a free class on owner financing so feel free to clickon the link in the description below and as always subscribe and click on thatnotification bell we're always looking to add new content to our page toultimately serve and bring value to you guys so thank you guys for watching thisvideo I hope this helped hope this brought more clarity again I love youguys always praying for you thank you for being part of the clock for thisfamily I'll see you guys in the next video.

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