One method of seller financing is to hold a note for many years. For example, you sell a property to a buyer who has no down payment. He takes an 80% loan from the bank and 20% down payment loan from you. Once he pays down his first mortgage, he will pay on your note.
The major benefit of seller financing, on top of the fact that you can charge more for your property because you are holding a note for the buyer, is that you can make more money by charging a rate of interest that is greater than what banks or money market accounts will offer you.
For example, say the bank pays 3% interest, money markets pay 5%, and ten-year treasury bills pay 7%. Nowadays you can charge 9% for seller financing.
If you were to invest $100,000 today, this is how much money you would accumulate in ten years at these rates:
134,392 in bank
162,889 in money market
196,715 in treasury bills
236,736 with seller financing (Second Mortgage Note)
Clearly there is a lot more money to be made if the seller can hold a note. Imagine if you held a $100,000 note for thirty years with a guarantee of 9% yearly earnings – you would be owed $1,326,768 in return.
This is a blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies. Charge Your Own Mortgage Interest | Installment Sale Capital Gains Tax Planning is brought to you by SimplifyEm Pay Rent Online and Property Management Software
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