Everyone would love to have more cash flow each month…especially the kind that does not require working at a job. With real estate, there are several ways you can generate more cash flow.
(1) Owning rental properties is an ideal way to increase your cash flow. For some, the drawback is dealing with tenants. If you have good systems in place, you can minimize your time and involvement with rentals. Some pluses for owning rentals are appreciation and eventually the tenants pay off the mortgage so you own a free and clear house which produces even more cash flow. Owning rentals also helps to reduce your taxes. But you’re still stuck with repair costs and potentially a complete remodel if a tenant messes up the house. An entire year of cash flow can be wiped out with an HVAC or roof replacement.
(2) You can get cash flow but reduce your exposure to repair costs by doing master leasing. A master lease is where you just rent a house from the owner with the right to sub-lease to your tenant. Depending on how your master lease is structured, you may be able to pass all repair expenses to the owner or limit how much you will be responsible for each month. Your cash flow is similar to owning the rentals and sometimes even more.
There’s another way to increase your cash flow without dealing with tenants or repair costs!
(3) When you sell houses with seller financing, you are not responsible for repair costs yet you still get to enjoy monthly cash flow. Let’s say you buy a house subject-to the mortgage for $169,000. It needs some cosmetic repairs but you sell “as is” to a landlord for $199,000 with $10,000 down. The house is worth $225,000. Your cash flow is $450 per month. Multiply that times 10 houses, you have about $4,500 a month in cash flow with no tenants or repair costs. If you get cashed out, you’ll have another $20,000 pay day!
Your Financial Freedom is all about having enough cash flow coming in every month to completely support your lifestyle – without working. As you see from the examples above there are several ways you can accomplish this goal. But if you’re looking for true freedom, selling with seller financing is the way to go.
Freedom is having the money and time to do what you want, where you want, and when you want.
I remember Jack Miller talking about a guy in Tampa Florida who had 200 properties he had sold with seller financing. His cash flow was through the roof. He never got calls from tenants. He never had to fix up a house after a tenant moved out. Selling houses with seller financing created a real money machine!
To maximize the amount of down payment I get when I sell with seller financing, I like to do a Highest Bidder Sale for the Highest Down Payment. One of my favorite deals was an amazing house I sold in Plano Texas for $169,000. I had purchased it subject-to the mortgage for about $100,000. Prior to the Highest Bidder Sale, I did get the house cleaned and replaced the carpet all for less than $3000. There were a lot of bidders for the property. The highest bidder was $50,000 down!
Same house — Would you rather get $50,000 down payment selling with seller financing or get a $2,000 security deposit and $2,000 first month’s rent from a tenant.. and potentially have to deal with repair costs later?
The rules changed! Several years ago the Dodd-Frank rules where passed which limits how many houses you can sell with seller financing to OWNER OCCUPANTS. You also have to get a mortgage broker involved to explain the mortgage terms and several other restrictions. Selling to owner occupants is still doable, but there are more hoops to jump through. (There is talk that President Trump will overturn Dodd-Frank)
The solution to Dodd-Frank is to only sell houses with seller financing to LANDLORDS who are always looking for more rentals and easy ways to buy more houses without getting bank financing. If you sell to someone who is not going to occupy the house, the Dodd-Frank rules do not apply! It is getting harder for landlords to get financing for rentals so they will pay a premium for houses they can buy with seller financing.
Virtual Investing to the Next Level:
Since you don’t have to deal with tenants and you don’t need a long list of local contractors, couldn’t you sell houses with seller financing ANYWHERE? It’s something to think about!
What could go wrong?
Occasionally you will have to deal with a buyer not paying their mortgage payments. You may be able to talk them in to deeding the house back to you or you may have to file a foreclosure. But when you get the house back, you can put it right back on the market to sell with seller financing again and likely for even more money.
Learn more about getting cash flow and freedom by selling houses with seller financing. Join us for a Coaching Call on Monday, October 9th at 7pm Central. My guest is Mitch Stephens who has done over 1000 house deals and many were sold with seller financing.
Time: 7pm CENTRAL
Access code: 120440