We've used "seller financing" on two self storage deals in the past year.

And it raised our cash on cash return by 20%+.

And lowered the amount of capital we needed by $500k.

Here's a THREAD about a deal of mine and how this magical debt structure can work.

👇👇

My method is simple. In the late stages of negotiation I submit two offers:

One at a lower price.

And one at the exact price the seller wants but with him holding back 10-20% of the purchase price in the form of a 2nd mortgage (with a second position to your bank loan).
Contrary to popular belief seller financing rarely includes the seller holding back 70-80% and acting as your bank.

Two reasons:

#1 most have some debt on the property.

#2 most want most of their money now.
Have you heard the saying:

"you name the price and i'll name the terms?"

This is a case of that situation exactly.

Lets paint a picture here:
Last week I was negotiating with a seller on a property in a small western PA town.

Not many interested buyers so I knew I had some leverage.

His asking price was $4.5MM. I wanted to pay $4.2M.

After a week or two and a lot of back and forth I found his lowest number.
$4.325MM.

At that point I made the two offers.

One at $4.2MM with normal terms and a bank financed closing.

The second at a price of $4.325MM with $500k of "seller financing".

So lets go over the dynamics:
My advantage is clear.

Instead of getting 70% ($3MM) financed through my bank and coming up with the last 30% ($1.3MM)...

I finance 70% ($3MM) through my bank, 11.5% ($500k) through the seller, and only needed to come up with 18.5% ($800k).
And when you raise money on a deal the capital you raise is expensive over time.

Generally 25% per year is what you pay to your LPs or what you expect as a return on your own capital.

But the seller only gets 5%.

Lets talk about how its structured with him:
Here's a picture of my Letter of Intent.

It's a 5 year term, meaning the rate is locked for 5 years. After that the rate goes up to 7%.

If I ever refinance, which I plan to do at 18 months, I have to clear his loan and pay it off.
Our bank is fine with this because our entire debt obligation on the deal still meets their 1.25x debt service coverage ratio. Aka its juicy.

And they have first position. Meaning if we default, they get made whole first.

+ they trust us and like us (that matters, a lot).
I don't use this on every offer.

Definitely not on competitive properties.

And not unless I have some leverage and rapport with the sellers.

Because it's a risk for them. They are your new banker. You stop paying or run the property into the ground, they lose big.
Note:

This increases your risk. It increases your leverage. And your obligation on a monthly basis.

Do not do this unless the deal is juicy enough to support the added debt.
@moseskagan @fortworthchris @SSal1234 @laughridge @scottyo21 @baldridgecpa @amandaorson @MattLasky @MarcSGIlbert + anyone else...

What did I miss? How have you utilized seller financing?

More from Nick Huber

How to get smarter very fast:

Interact with smart people here on Twitter who have different world-views than you do.

And let them change your mind on something.

Here are the 30 people you should follow (along with my favorite tweet from each)👇👇

Twitter can be terrible if you follow negative people.

It can also be more valuable than a college degree if you follow (and network with) the right people.

You get to look right into their brain and read a daily narrative of HOW they think.

Ok lets go:

#1: @ShaanVP

You know he's all about venture capital based entrepreneurship. I'm about small (non-sexy) business. We disagree on a lot of stuff.

But he's done it and he's won. Bonus follow: @theSamParr (@myfirstmilpod podcast


#2: @fortworthchris

He is where I want to be in 15 years. Has built a massive real estate private equity firm from the ground up. Super grounded with what the way he does business and his podcast @theFORTpodcast is top


#3: @Julian

I'm a scattered thinker and procrastinator.

Julian is a master of clear thinking and simple but effective writing. A world class example of content marketing and

More from Marketing

I get DM's from founders with the same specific problems.

Here's a public list of marketing tools I recommend:



1. Twemex

Twitter Advanced search on steroids.

Whenever you visit someone's account, see their most popular Tweets of all time in order.

H/T @Julian for this

https://t.co/8P2YJ3Jrf0


2. Good UI

Historical log of successful and failed A/B tests from the likes of Amazon, Netflix, Google

3. Blisk

See how your website looks across every device.

Got an Android user complaining how your website looks but you only have an iPhone? Use Blisk.

4. Really Good Emails

Struggling with email ideas?

Library of thousands of quality emails to get inspo from.
I studied hundreds of top copywriting examples with @heyblake.

Use these 30 copywriting tips to convert readers into customers 🧵

Tip from Alex: Repeat Yourself

Reason: Your main benefit shouldn’t be expressed subtly. Repeat it three times. Make it known.

Example: Apple’s M1 Chip


Tip from Blake: Start with goals for the copy.

Reason: You need to know what you are writing, for whom, and what action it should lead to. No guesswork.

Example: My content engine at
https://t.co/jYMMlbgFCw


Tip from Alex: Use Open Loops

Reason: Open loops peak a reader's interest by presenting an unsolved mystery to the reader. Our brains are hardwired to find closure. Make your product the final closure. Example: Woody Justice


Tip from Blake: Write short, snappy sentences.

Reason: People have short attention spans. And big blocks of text are super hard to read. Make it

Example: Every blog from @Backlinko

You May Also Like

1/12

RT-PCR corona (test) scam

Symptomatic people are tested for one and only one respiratory virus. This means that other acute respiratory infections are reclassified as


2/12

It is tested exquisitely with a hypersensitive non-specific RT-PCR test / Ct >35 (>30 is nonsense, >35 is madness), without considering Ct and clinical context. This means that more acute respiratory infections are reclassified as


3/12

The Drosten RT-PCR test is fabricated in a way that each country and laboratory perform it differently at too high Ct and that the high rate of false positives increases massively due to cross-reaction with other (corona) viruses in the "flu


4/12

Even asymptomatic, previously called healthy, people are tested (en masse) in this way, although there is no epidemiologically relevant asymptomatic transmission. This means that even healthy people are declared as COVID


5/12

Deaths within 28 days after a positive RT-PCR test from whatever cause are designated as deaths WITH COVID. This means that other causes of death are reclassified as