Hey there, asset builder! It’s Leland Baptiste, and today we’re going to dive into two real estate investing strategies that you probably haven’t heard much about. No, this isn’t your typical, “buy low, sell high” kind of talk. We’re going a little deeper—actually, much deeper. These strategies aren’t the standard go-to paths, but believe me when I say, they’re still incredibly effective.
What You’ll Learn Today
- Seller Financing: Why this isn’t just some niche trick, but a power move you can use to take control of your real estate empire.
- Conversion: How you can turn one property into two separate assets—yes, two—without even breaking a sweat.
Let’s get into it.
Seller Financing: Why You Should Know This
First off, let’s talk about seller financing. Now, I know what you’re thinking: “Seller financing sounds fancy, but is it really all that?” Well, yes. Yes, it is. And I’m going to show you how it works.
In case you’re not familiar, seller financing is when the seller (that’s you) acts as the lender and finances the buyer’s purchase of the property. You’re basically the bank, but without all the paperwork and red tape. You get to create your own terms, and you get paid over time, often with a hefty interest rate.
The Magic of Seller Financing
The beauty of seller financing is that it’s flexible. You don’t have to follow the traditional mortgage rules. You’re not restricted by the bank’s limitations. You’re in the driver’s seat, creating your own terms and doing business on your own terms.
Here’s the thing: when you’re the seller, you have the power. You’re calling the shots. You can come up with creative financing options that are a win-win for both you and the buyer. That’s right—creative. Like, really creative.
Want a higher price for the property? Go for it. Want a balloon payment at the end of a few years? Do it. Want to charge a higher interest rate to make it worth your while? You can do that too. The possibilities are endless.
And the best part? You still maintain control of the property. The title stays in your name (or your trust, your LLC, whatever vehicle you choose), so you’re not handing over full ownership—just the rights to pay for it over time. It’s like selling, but you still hold the keys to the kingdom.
Taking the Reins: How to Make Seller Financing Work
So how does this play out in the real world? Here’s what I do. I take a property, and instead of going through the hassle of traditional selling, I find a tenant who wants to buy. That’s right, I turn a regular tenant into a tenant-buyer. They get to pay me rent, but it’s a higher rent that gets credited towards buying the property.
This is a win for everyone:
- The buyer gets to eventually own the property, which is a dream for many people.
- The tenant is more motivated to maintain the property because they know it’s going to be theirs one day.
- I’m not tied down to managing the property. The tenant is responsible for maintenance, cutting the grass, handling repairs, and all the regular upkeep.
I’ve seen these deals go as short as two years, or as long as thirty. Yes, thirty. People will gladly pay a higher rent if they’re given the option to own later.
A Word of Caution
Now, before you get all excited and start setting up your own seller financing deals, let me give you a little advice. You need to be careful with the wording. Specifically, don’t call it a “rent-to-own” unless the terms are crystal clear. You’d be surprised how many people mess this up, leading to legal headaches.
For example, let’s say you accept a large deposit and call it a “down payment” when in reality it’s just a non-refundable deposit. That’s a slippery slope. In some states, that can get you into hot water. Be very clear about what the payment is for and how it’s used. It’s a small detail, but trust me—it’s worth paying attention to.
Conversion: Becoming the Bank (It’s Easier Than You Think)
Alright, now let’s talk about the second strategy: conversion. This one’s a game-changer because, essentially, you’re going to become the bank.
When I say conversion, I mean you’re taking a property that you own and turning it into something that makes money for you without requiring daily involvement. You’ll sell the property to someone, but instead of using a bank for financing, you act as the lender yourself.
Here’s how it works:
- You sell the property on a contract and transfer the title to the buyer’s name (it’s a real sale, not just a rental agreement).
- You create a mortgage for the buyer out of thin air. Seriously, you make it up as you go. You agree on a price (say, $200,000) and terms, and voilà—you’ve just created a mortgage that’s now a part of your portfolio.
Wait, Why Would Someone Pay More Than the Property’s Worth?
Now, I know what you’re thinking: “Why would someone pay $200,000 for a property that’s only worth $100,000?” The answer is simple: Interest.
Banks charge interest on loans, and that’s how they make money. You can do the same. It doesn’t matter that the house is worth $100,000. What matters is that you’ve agreed to let the buyer pay $200,000 for it, with interest over a set period.
This might sound crazy, but it works. People are willing to pay extra because they don’t have other financing options. Maybe their credit isn’t great, or they don’t want to deal with the hassle of a traditional mortgage. You can offer them an alternative, and you get paid over time—with interest.
The Power of Being the Bank
When you become the bank, your payments come in every month. Just like a mortgage lender, you collect payments that cover both principal and interest. This creates a steady stream of income for you, and it’s beautiful because you don’t have to manage anything else. You’re literally just the bank—sitting back and collecting payments.
And because you’re the bank, you can be creative with the loan terms. You can offer terms that fit your buyer’s needs, while still ensuring you make a profit. That’s the magic of it.
Selling the Note: A Quick Exit Strategy
Here’s the kicker: once you’ve created this mortgage, you can actually sell the note. That’s right—you can sell the mortgage to another investor, and they’ll pay you cash for it.
Let’s say you’ve created a mortgage worth $300,000, but you’re tired of waiting 30 years to get your money. You can sell that note to another investor for cash—maybe $150,000, maybe $200,000, depending on the future value of the note.
This is where things get exciting. You’ve just turned a single house into two assets:
- The property itself (which you sold to the buyer)
- The mortgage (which you can sell to another investor)
This is the kind of creative financing that makes real estate investing so powerful. You’re not just buying and selling properties. You’re creating assets that can be sold, traded, and leveraged. You’ve turned your house into a cash machine.
The Key to Success: Getting Hands-Off
Now, for those of you who like to keep things simple and hands-off (I know, it’s hard to imagine anyone not wanting to be a full-time landlord), you can hire a servicing company. These companies handle everything from collecting payments to ensuring the taxes are paid and the insurance is up to date.
So, once you’ve set up the mortgage and the servicing company is collecting payments for you, you can sit back and relax. The servicing company will send you your payments, broken down into principal and interest, and they’ll handle all the communication with the buyer. You’re essentially the bank—no hassle, no drama.
And remember, this is a cash-flowing asset you’ve created. It’s no longer just a piece of real estate; it’s a note, it’s a mortgage, and it’s making you money every single month.
Conclusion: Making Money in Your Sleep
To wrap it up, here’s the deal:
- Seller financing gives you the power to finance deals yourself, keep control of your property, and get paid over time.
- Conversion lets you turn your property into a mortgage and become the bank—collecting payments and earning interest without lifting a finger.
Both strategies offer incredible opportunities for creative investors like you. And while they might sound a bit unconventional, they work. All you need is the right mindset and the ability to think outside the box. So what are you waiting for? It’s time to build your empire.
