Why Seller Financing Exists in the Real World
2 min read
Solving the Financing Gap
Seller financing is not a workaround or a "trick." It exists because many real properties do not fit inside traditional bank rules. Traditional financing does not work for every property or every situation. Creative finance exists to solve these real-world financing gaps.
Seller financing can lower monthly payments by changing the deal's structure, such as using a lower interest rate or a different amortization. It can also work with much lower down payments than a bank would ever allow.
Check Yourself
Q: Why do investors compare real estate deals to the stock market?
A: Investors want a higher return than a simple index fund. If the deal does not beat the stock market, they will put their money elsewhere.
Q: Why is "just put more money down" bad advice for investors?
A: Putting more money down lowers the investor's return on investment and locks up cash that could be used elsewhere.
Q: What happens to the buyer pool for multifamily units when the rent cannot cover the mortgage?
A: The buyer pool for these multifamily properties shrinks to almost zero. Investors will not buy a property that loses money every month. This leaves only a very small number of buyers who want to "house hack" (live in one side and rent out the other).