How I Purchased a 4 Unit Multi Family Property with Seller Financing - YouTube

Hey everyone. So you always hear me talk a lot  about how I buy all my properties with none of  

my own money, I buy my flips. That way, I buy my  rentals that way. And lately, we've been flipping  

a lot of houses, we have some more capital or  some more funds, capital is just kind of like the  

swanky word for them. So we have some more funds.  So what we try and do with those funds is either  

lend them out, or we've been looking at some  multifamily properties and possibly putting money  

down on them, I always try to buy without putting  any of my own money into them. But sometimes I  

come across a property that I feel is too good to  pass up. So I'm willing to come out of pocket with  

some money these days, because I have a little  more funds available. So welcome to our talk.  

Today, we're going to chat about how I bought a  four unit using seller financing. My name is April  

Crossley, I buy rental properties and flip houses  in Berks County, Pennsylvania. And thank you for  

joining me on YouTube. If you like what you see in  the videos, make sure you click like and subscribe  

to the channel so you don't miss anything. So  let's get started and talk about this four unit.  

This is a four unit that was seller financed and  someone that watches my YouTube channel, Matt,  

actually, if Hi Matt, if you're watching actually  asked me how do you buy on seller finance, and  

there's a lot of different ways you can structure  a seller finance deal. This is just one example.  

Okay, from a property we recently purchased.  So this was a four unit we seller finance. And  

the biggest lesson I learned is patience. Now if  you know me, personally, I have zero patience or  

maybe negative if you could be in the negative  with patience, I'd probably be in the negative.  

But I've been working on it. Because Patience is  a huge killer have it if you don't have patience,  

lack of it, I'm sorry, lack of patience is a huge  killer for just about any business owner. So it  

was a huge lesson in patience with this deal.  This was an older gentleman that owned a four  

unit apartment building in my area and people are  gonna ask how did you find the deal direct mail,  

I did direct mail and he got a direct mail  letter from me and he called me this was the  

only building he owned, okay, he's not really cut  out to be a landlord. And by not cut out to be a  

landlord. I mean, he's a do it yourself repair  man who's not a licensed contractor. So repairs  

at the property were really shoddy, he lived  close by so he would stop by and pick up the  

rent in cash. tenants were just walking all over  him, his rents were under market, the tenants,  

he just did not have a good relationship with  them. He didn't communicate professionally with  

them. It just wasn't a good situation. So he  knew he what he knew was that he liked getting  

money from the building. And you have to listen  to what sellers tell you. So when he called me,  

he said, I'm not cut out to be a landlord. So  that's his pain point. I like getting money from  

the building. So that's what he enjoys about the  process. So I just married those two and said,  

Have you ever thought about seller financing? And  he's like, I don't really know what that means.  

My next question was, do you owe anything on the  building? He said, I don't. It's free and clear.  

I go there every month, I pick up like $700 in  cash. I like it. Two of the apartments around the  

two are rented. One lady is moving out. So he's  got another pain point. He's got apartments that  

are vacant, he's got people moving out. He had  an apartment that was vacant for over six months.  

If you're a professional landlord, that's giving  you chest pain, okay? I'm one vegan for 30 days,  

I'm having a frickin heart attack. Over  six months, he had a unit vacant. So he  

was motivated. He wasn't like running the building  efficiently. He's like, as long as I can go there,  

and I have like two units rent in I'm making 700  bucks in cash. That's good for me. So I said,  

What if I can keep making you $700 In cash  every month, but you don't have to deal with the  

building at all. And he's like, Well, that will be  nice. Like, okay, now we're getting somewhere. So  

let's talk about seller financing. So I explained  to him as I can go to a bank and get a loan. Or  

I can come to you as the seller and get a loan  from you. And I had to explain the whole process  

like the loan is secured by a mortgage just like a  bank. He can do a credit check on me a background  

check he can get. I'll give him copies of my  bank account balances. I'll fill out a personal  

financial statement, just like a bank would  ask for a bank asked for all that information.  

I gave all that information to him. It took us  over four months of educating about what solar  

financing was negotiating back and forth okay  about it. As soon as I thought we were coming  

to an agreement, he'd be like, but the other  day I was talking to my accountant or I was  

talking to my attorney or I was talking  to my friend, everybody's got accountants,  

attorneys and friends. But they turned to that  don't know anything about real estate investing,  

okay, his accountants trying to get him to like  sell it and buy annuities. His his attorney has  

no idea about real estate, it was just a mess, I  actually ended up linking him up with my attorney,  

so that she could help educate him and like  vouch for us. So your team is really important.  

Four months later, we finally had this thing  hammered out and under contract, so be patient,  

because it's worth it, I'm gonna go over that with  you. So our purchase price was 140,000. That was  

our agreed upon purchase price, we went back and  forth forever about how much money I was going to  

give him down, did he want, I of course, want to  put as little down as possible, because it's money  

coming out of my pocket, did he want 5000, down  10,000 Down 20,000. Down at first, he was like,  

I want like $25,000. Now I'm like, if I was gonna  put $25,000 down, I'll just go get a loan from a  

bank. Like the reason I'm coming to you is more  flexible terms and trying to keep you making  

money, etc, etc. So where the accountant did come  in handy was based on the sellers current income,  

his accountant didn't want him taking any large  chunks of cash, because what that would do was  

kick him into another tax bracket for the year.  And the accountant was like, you don't want that,  

because you're gonna end up paying more in taxes,  there were other things going on in his life with  

his income and some family members that had left  him money. And the accountant didn't want him  

taking a lot of money. So we settled on $15,000.  So sometimes you have to adjust your numbers,  

when you're laying out your seller financing  terms, you have to be a little bit flexible,  

sometimes that's less down money, more down  money, but you can balance that out by using  

using a lower interest rate or a higher interest  rate or a longer term or a shorter term. So the  

more money he wanted down, I could have said,  Okay, I'm gonna give you more money down. But  

I want to amortize it over 40 years, instead of  30 years, there's tons of different ways you can  

flex and change the seller financing terms. So  140 $15,000 down, if I would have had this same  

purchase price with a bank, a bank loan, and on  a seller, I would have had to put $35,000 down.  

So I'm putting $15,000 down instead of $35,000  down. Not only that, but banks sorry, if you  

work for a bank are a total pain in the ass. Okay,  it takes like six to eight weeks to close a loan,  

they make you jump through a bunch of hoops. It's  just a long drawn out process a ton of paperwork,  

I takes forever. So we were able to close quicker  because we did seller financing and I was able to  

put less down. Now I told you I had money that I  needed to move. And I told you like extra funds.  

And I told you the seller was a do it yourself  repairman, which basically means nothing was done  

properly. Okay? Don't do stop yourself. If you're  not a licensed contractor, hire somebody. Okay.  

So there were a lot of things that the property  I knew I had to fix right away. Now in my area,  

they do code inspections. So if you own rentals,  they get inspected every year, or every two years,  

every three years, depending on what area  you're in. This property was code inspected,  

and there were a lots of things that were missed  that were not safe. So because I only put 15,000  

down, that left more money for me to put into  the property to make it safe to upgrade it,  

and why do I want to upgrade it because I'm gonna  raise the rents. Okay. So we financed put 15,000  

down financed 125,000 at 5%. For 30 years, where  did I come up with 5% he wanted 5% he was stuck  

on 5%. If you can get me 5% interest, that's what  I want. Because my accountant told me that that's  

what I can get if I put my money into an annuity  and I was like, sure I can get your 5% No problem.  

So we financed 125 5% for 30 years. If I would  have financed with a bank, I would have had to  

finance on a 20 year term, maybe 25 But more  likely a 20 year term. The shorter the term,  

the higher your payment is going to be the less  cash flow you're going to have okay shorter the  

term higher the payment less cash flow got that got it. Okay. So, my monthly payment to the  

seller was 670 103. And what if he told me in the  beginning, I like if I can have $700 A month cash  

that I picked up from this property that was what  was important to him. This is where listening to  

sellers really comes in handy because then I say  Look, I'm getting you almost $700 a month, that's  

coming to you every month, just like you would  pick up at the property. He was like, am I don't  

have to do anything with the property and I don't  own it anymore. I'm like, You're not responsible  

for taxes, you're not responsible for insurance,  you're not responsible for repairs, tenants  

will never call you again, nothing. So the deed  transferred, we bought the property and the deed  

transferred, and I was responsible for everything.  These were my rents, when I bought the property,  

total 23,050 or 220 3000, that'd be really nice.  2350 a month, what I did was I increased the  

rents. So the tenants there was one bedrooms and  two bedrooms, so the tenant was at 625, I took  

them to 725, this one was at 625. And I took them  to 700, the apartment sizes vary a little bit.  

This one was at 575, I took them to 650 and 525  to 600. Now, before you think I'm this evil, mean  

person that just comes in and jacks up rents know  that I met personally with every single tenant,  

okay, and introduce myself, I'm the new landlord,  I want to let you know, we run a professional  

business, all your rent is going to be paid online  rent isn't accepted after the first of the month,  

we have no grace period. But in return, we're  going to like really fix up this building and make  

it really nice for you, we're going to renovate  your apartment. I mean, these tenants have old  

wooden doors that any a child could have kicked  in, like they were like half rotted, they weren't  

saved. There was a deck on it. That wasn't say,  there's a lot that had to be changed. So I gave  

the tenants the choice, you can stay and your rent  is going to increase by 50 bucks a month, until  

you're at the rent that it needs to be at which  is market rent. Or you can give me notice, and  

you can leave at any time. And I'm not going to  hold you to your lease because my thought was if  

they leave, I'm going to go in and fully renovate  their apartment and get more for it anyway. So  

it ended up that all the tenants stayed that were  there, we had one that was supposed to be moving,  

that still hasn't moved. We had another apartment  that was vacant that we filled, that we renovated  

and we fill so I didn't just jack up the rents  right away, I gave them the option to leave and  

I did on a sliding scale. So we took our income  from 2350 a month to 2675 a month. But that's  

not the only thing we did. Okay, so we're just  making this building cash flow better and better  

and better by raising rents. But raising rents  isn't the only way to make it cashflow better,  

because you're eventually going to cap out we  like to be just below market rent, and have a nice  

apartment. That's a little cheaper than everyone  else on the market because then our tenants stay  

forever. Okay, it's a tactic that has worked very  well for us. And we try to take really good care  

of our tenants. And they stay long term, we ended  up putting $20,000 in rehab into the property.  

So we did a lot of things to make it safer and  a lot prettier, a lot more appealing. We put in  

all the windows, everything that I've done, I'm  going to go over that with you in a second. So  

other than raising rents. I'm going to hop to  our next sheet here and I'm going to show you  

guys what we did with expenses to help make  the building cash flow better. So now we have  

our income at $32,100 a year. And these are what  our expenses are I have payments to my seller. I  

have taxes insurance, and owners electric meter,  gas heat, okay. The building has one gas heater,  

and it heats the whole four unit. There are  some landlords that won't even buy buildings  

like this because they say No way. If I  pay the heat for everyone in the building,  

I'm not buying the building because you're paying  heat tenants have their windows open. So we put  

clauses in our lease so that if we drove by and  their windows were open in the middle of winter,  

they basically like get some sort of like penalty  fine for that. But the other thing we did because  

we pay the gas heat is the landlord. The building  had all old windows like by old I mean rickety,  

rotted, wouldn't seal all had drafts in the  apartment windows, they were really bad. We  

put in like 35 new windows in this building. It  was a large expense, like half of our rehab costs  

was just in Windows. Okay, so this gas heat  expense. That's from the old landlord. Okay,  

this was his gas heat expense. I expect this is  the first year we've had the property this will  

be the first winter that my gas heat expense  is going to be way less than that. Okay,  

just from putting new windows in. The other thing  is the water sewer expenses paid by the landlord.  

And the landlord had a washer and dryer, I call  it washer and dryer insanity. He had a washer and  

dryer in the basement that was not Queen operated  at all, and he pays the water. Why is that bad,  

because everyone in the buildings doing their  laundry, he's paying to do their laundry, he's  

basically paying to do his tenants laundry. So we  disconnected the washer and dryer, if they want to  

do laundry, there's a ton of laundromats in the  area. But until we can get a coin operated in  

there, we're not going to have a washer and dryer.  And it's only four units. It's not like it's a  

huge building. So I expect that my water sewer  bill is going to drop significantly too. We have  

an inspection fee, a trash fee. Vacancy, we're not  going to have near the vacancy he had because of  

what I told you earlier, we take really good care  of our tenants, we have a maintenance expense, a  

lawn and snow expense, which is free for the first  year because the other great thing about buying  

from a mom and pop landlord is the seller that is  financing it for me he lives near the property and  

he has the basement full of stuff, he was using  it as storage. And I asked him to clean it out.  

And he told me he would mow the lawn and he would  clear the snow for the first year if I would give  

him a year to clean out the basement sounds like  soul because way cheaper than paying someone to  

do it. And until I can see how my gas and my water  and sewer shake out, it's nice to know I'm getting  

that for free. Then we also factor in capex.  So capex is like money you factor in for large  

expenses, for the large things like roof Heater,  Hot Water Heater, stuff like that. So we factored  

in 2000, a urine cap x, and then this is what our  expenses come out to. Okay, so we have our income  

is, oh, I'm taking my income of 32. One minus my  expenses is 26 580. So our total income net income  

is 5520 a year, which is $460 a month is what this  building puts off, which is $115 a unit, which for  

now is 60 bucks a month, it's better than nothing.  And I think this is only going to get better,  

it's just going to cash flow more and more. So  we're decreasing our expenses, raising our rents  

a little bit, and the building's just gonna  look better and better and better every year,  

every year, we're going to take this $2,000 And we're going to put it in towards projects  

in the built in the building along with we have a  maintenance expense in here. So we're gonna keep  

making the tenants departments better and better.  So the buildings gonna get even better looking,  

attract good quality tenants that are gonna  stay in place for a long time. And in the end,  

make us more money. So that's how we did our  seller finance for unit. Thank you guys for  

joining us. Make sure you subscribe to our  channel, we're going to do a video on how  

I'm getting out of this. So this seller financed  it for me for five years. So five years from now,  

I have to completely pay him off, which means  I have to go get a loan with a bank. So he's  

only holding the financing for five years.  So minutes show you a little video breakdown  

of how I am getting out of this project in five  years what my plan is, so make sure you subscribe  

to our channel click like you can follow us on  Facebook at Lazy Girl Real Estate Investing. You  

can follow us on Instagram at April Crossley and  you can check out our website and our courses at  

www.lazygirlrei.com Have a great day Transcribed by https://otter.ai