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).
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.
👇👇
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).
Two reasons:
#1 most have some debt on the property.
#2 most want most of their money now.
"you name the price and i'll name the terms?"
This is a case of that situation exactly.
Lets paint a picture here:
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.
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:
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).
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:
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.
And they have first position. Meaning if we default, they get made whole first.
+ they trust us and like us (that matters, a lot).
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.
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.
What did I miss? How have you utilized seller financing?
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Example: Every blog from @Backlinko
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
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The entire discussion around Facebook’s disclosures of what happened in 2016 is very frustrating. No exec stopped any investigations, but there were a lot of heated discussions about what to publish and when.
In the spring and summer of 2016, as reported by the Times, activity we traced to GRU was reported to the FBI. This was the standard model of interaction companies used for nation-state attacks against likely US targeted.
In the Spring of 2017, after a deep dive into the Fake News phenomena, the security team wanted to publish an update that covered what we had learned. At this point, we didn’t have any advertising content or the big IRA cluster, but we did know about the GRU model.
This report when through dozens of edits as different equities were represented. I did not have any meetings with Sheryl on the paper, but I can’t speak to whether she was in the loop with my higher-ups.
In the end, the difficult question of attribution was settled by us pointing to the DNI report instead of saying Russia or GRU directly. In my pre-briefs with members of Congress, I made it clear that we believed this action was GRU.
The story doesn\u2019t say you were told not to... it says you did so without approval and they tried to obfuscate what you found. Is that true?
— Sarah Frier (@sarahfrier) November 15, 2018
In the spring and summer of 2016, as reported by the Times, activity we traced to GRU was reported to the FBI. This was the standard model of interaction companies used for nation-state attacks against likely US targeted.
In the Spring of 2017, after a deep dive into the Fake News phenomena, the security team wanted to publish an update that covered what we had learned. At this point, we didn’t have any advertising content or the big IRA cluster, but we did know about the GRU model.
This report when through dozens of edits as different equities were represented. I did not have any meetings with Sheryl on the paper, but I can’t speak to whether she was in the loop with my higher-ups.
In the end, the difficult question of attribution was settled by us pointing to the DNI report instead of saying Russia or GRU directly. In my pre-briefs with members of Congress, I made it clear that we believed this action was GRU.
