NAVIGATION

Episode Twenty: Seller

Financing and Other
Ways to Fund your Real
Estate Investments
In this episode, Lance and Randy
discuss how budding real estate
investors can overcome one of their
primary fears: Where to find the funds
they need. They talk about the various
ways to raise capital and the
importance of seller financing.
FINANCIAL INDEPENDENCE: A BETTER PERSPECT
Episode 20: Seller Financing an…

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What you’ll learn in this episode:

The #1 question Lance gets from
people looking to get started in real
estate is: “Where do I get the money?”
Many people are unnecessarily
cheating themselves out of
opportunities because of this fear and
limiting belief. It keeps them from
getting started.
Lance advocates for seller financing,
which means the seller acts as the
bank. They don’t need cash for the
property. They’ll take monthly
payments. Lance bought his very first
fourplex with 100% seller financing.
The seller took no money up front. The
agreement was that he pay her a
monthly mortgage payment as if she
were the bank.
Lance introduces a unique twist on
seller financing. Say he wants to buy a
fourplex and the seller insists on
$200,000 cash, which means he would
have to go to the bank, put up a down
payment and get a traditional loan. He
offers an option: $200,000 cash is
option one. Option two: he gives
$220,000 if they’ll take 10% down and
finance 90% for five years. This option
is attractive because the seller can
make more money.
Working another hypothetical deal will
leave the buyer needing $35,000 for a
down payment, closing costs and fix it
money. They would need to find a
private lender or otherwise raise
private money. A good place to start is
people in your network – folks you
work with, go to church or synagogue
with, family, friends, local real estate
club.
A good opening question is, “Do you
have an IRA, or any other investment
capital, not earning a high return
safely?” Then you mention your
project and take the conversation from
there. If they agree to a deal, then it’s a
matter of figuring out what percentage
you’re going to pay them. The good
news is, there are no fees up front, no
points you’re going to pay. The agreed
upon interest rate will probably be a
single digit.
Key point to remember: You’re dealing
with mom and pop owners with these
small properties, and your potential
investors are mom and pops too.
Randy says there is a high percentage
of IRAs and self-directed IRAs earning
very little because they’re in cash or
money market. People are fearful of
the market. We’ve had a great run
since 2008 and one of the defenses to
fear is to sit in cash and let
opportunities go by. There is a lot of
easily accessible money in these IRAs
and 401(k)s. Lance was told by an IRA
custodial company that 95% of the
money in these accounts is earning less
than 1%.
There’s this whole world of self-
directed IRAs and individuals with
IRA accounts. These are the type of
people who have accessible cash to
help fund your real estate projects.
In Lance’s first five years as an
investor, he did seller financing. When
he needed private money, his self-
directed IRA lender Carl would loan
him money from his IRA. Lance
would pay back the IRA and then
Carol would loan him more, Lance
would pay him back, etc. He met Carl
at a real estate club, which is a group
of people that often have money to
lend and who like to put deals together.
Referring to the “15 minutes to get
started” that Lance and Randy
discussed on their previous podcast
(B), Lance says, “That could be 15
minutes of conversations with broker
to find your deals, but also maybe 15
minutes of conversations to find your
money sources.”
Besides seller financing and a private
lender, a third option for finding and
raising money is finding a business
partner. Lance uses an example of
clients who wanted to buy a $2.4
million apartment building but had
been laid off so the bank wouldn’t loan
them money. So they went out and
found a business partner, a sheetrock
contractor. The partner agreed to these
terms: He puts up the 20% down
payment ($480,000), sign for the note
and guarantee the bank loan on the
balance in exchange for 1/3 ownership
on the project. In addition, they
promised to give him the sheetrock
contract for his business.
Randy says you can also “partner”
with his IRA, his wife’s 401(k) and her
IRA, and even with his children’s
money, IRAs, Roth IRAs and his own
cash. The LLC partnership you can
create this way can acquire property.
It’s very flexible.
Another Lance tip: Keep things simple.
A lot of folks just starting out get
derailed by over complicating.
Simplicity is what’s going to allow
people to get what your deal is and
make them willing to move forward
with you.

Resources:

LanceSchool.com
Grab a FREE Copy of Lance’s Best
Selling Book, How to Make Big Money
in Small Apartments here.
Get Access to Lance’s Best-selling
Small Apartment Wholesaling Course
here.
Get Randy’s The Financial
Independence Toolkit ℠
Book Book an Appointment with
Randy

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