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Investing In Real Estate Podcast - Seller Financing

What’s the best way to structure a seller financing deal? Is seller financing a smart way to buy rental properties? That’s the first topic we’re diving into on this Q&A episode of Investing in Real Estate!

On today’s show, I’m taking three thought-provoking questions from three great listeners. Today’s topics include seller financing, first-lien HELOCs, and preparing for loans. Click play to hear my answers to your investing questions!

On this episode you’ll learn: 

  • What to consider about seller financing.
  • How a first-lien HELOC is used.
  • How to prepare for getting a loan on a rental property.

What to Consider About Seller Financing

Seller financing can be a great option for financing your rental properties. I would suggest reading Susan Lassiter-Lyon’s book, Getting the Money. Though the book is specifically about finding private lenders, it contains a lot of invaluable information you can use to negotiate a deal. One of her top points that stands out to me is to stray away from any sort of prepayment penalty. You’ll also want to be sure that you use a promissory note and a mortgage with your title company. Seller financing can be extremely powerful on a rental property, but I would also suggest considering non-recourse financing as another method for growing your portfolio.

How a First-Lien HELOC Is Used

A home equity line of credit is often referred to as a second mortgage, because it is a second loan based on the equity of your home. You can even use a HELOC to pay off your mortgage, like we wrote about in our book. Once your mortgage is paid off, the HELOC would be considered first position (instead of standing as the second mortgage). To my knowledge, you cannot take out a first-lien HELOC without first having a traditional mortgage.

How to Prepare for Getting a Loan on a Rental Property

Different banks will have differing underwriting requirements (which is why it can be helpful to shop around). In general, banks are going to want to look at your current investments, debt-to-income ratio, and credit score. You’ll want to be sure not to take out any new loans or make big purchases while going through the lending process. See my video here on the do’s and don’ts of getting a loan.

Ask Me a Question at morrisinvest.com/clayton

Episode Resources
Book a Call with Our Team
morrisinvest.com/Clayton
The Power of Non-Recourse Financing for Building Wealth 
Getting the Money by Susan Lassiter-Lyons
How to Pay Off Your Mortgage in 5 Years
Download the free Financial Empowerment Bootcamp
Download the Freedom Cheat Sheet
Subscribe to Investing in Real Estate on iTunes
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.

AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning, at NO additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. However, this does not impact my opinion. We recommend them because they are helpful and useful, not because of the small commissions we make if you decide to​ use their services. Please do not spend any money on these products unless you feel you need them or that they will help you achieve your goals.

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Posted on

February 14, 2022

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