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The properties you're seeing on your screen are just a few of the tracks of land that I've bought over the last few years. But I want to also give you some numbers so that you can see the big picture. In the last 5 years, I've acquired 109 separate tracks of land that total 604 acres in size and $4.5 million in market value. The amount of my own personal money that I used to acquire all that land was zero.
Look, I'm not as poor as I used to be, but if I had stayed within my budget when I started buying all that land, I'd still be broke today. People talk about no money down real estate like it's one big thing, but it's not. There's a lot of different ways that you can buy land, or any real estate, with no money out of pocket. And all the different ways that you can do it are straightforward. In particular, the one that I'm going to share with you here on this video—what I'm going to share with you on this video—is an extremely powerful source of funds that you can use for your next land purchase. This source of funds is used over a thousand times a week by land buyers just like you across the United States, and it enables you to acquire land that would otherwise be unaffordable with other loan programs, for little to no money out of your pocket.
But first, for you to understand how this loan program works and why it's such a powerful lending program for land buyers, I want you to first imagine that you're walking onto a new car dealership for the purposes of acquiring a brand new car. About 85% of Americans, when they buy cars, are going to secure some type of financing as a part of their purchase, often times through the dealership that sells them the car. What many people don't know is that the profit margins that the dealerships make on the new automobiles that they sell are actually pretty low. In other words, a $30,000 automobile may only generate about $2,000 in profit for the dealership. And $2,000 may sound like a good chunk of money, but that's a gross margin of about 6.7%, and that's paper thin. In fact, some cars are actually even lower margin than that. And yet the people that are buying these cars are focused entirely on price, because when they deal with the sales representative, they are entirely focused on getting the lowest price possible. And they think that once they've settled on price, the negotiations are over, and that once they start walking into the dealership to get the financing approval in the finance department, that is simply an administrative exercise where they check the box and they grab the keys and they drive off the lot. But the last thing that these car buyers would ever imagine is that the finance department that issues the loan is where the real money is made. The real money is made in the finance department, because in addition to charging origination fees from the buyer when they originate the loan, they're also able to mark up the interest rate. And in addition to the purchase price that gets paid down every month, they're able to generate cash flow by charging interest on top of it. And the punchline is that if ever that buyer stops making payments, then the dealership just keeps all the money they've collected, and they repo the car too, only to then just sell it to another buyer.
When you are buying land, what you're basically doing is you're buying a car from a car dealer that is asking you to go across the street to the bank to get financing from a third-party lender prior to making the purchase, because the car dealership that's selling you that car, they haven't figured out that they're going to make more money selling you the money for the car than they will selling you the car itself. The best source of funds for your next land purchase is the seller. The seller's the best source of funds because getting that loan approved from the seller is much easier. There's no credit check or credit approval or underwriting. The terms that you're able to access from the seller are fully customizable, and I'm going to show you exactly how to put these deals together, including how to buy land with $0 out of your own pocket.
The two main limiting beliefs that buyers have about owner finance are: one, why would the seller agree to it? And two, that it seems unconventional or somehow complicated. Some of the reasons that a seller would entertain owner finance are: number one, it allows them to sell their land at a higher price; number two, it allows them to sell their land faster; number three, it allows that seller to generate cash flow above and beyond the purchase price; and number four, it enables them the same exact security, and sometimes more security, than bank lenders get when they issue mortgages. The second limiting belief is that owner finance is somehow unconventional or complicated to do. Owner finance is extremely common in land transactions, and when you look at real estate transactions as a whole, every year approximately 2 to 5% of all real estate transactions are done with some type of owner finance. But with land, the percentage is higher, and that's about 10 to 15% of all land transactions are done with owner finance. Believe it or not, that's between 50 to 75,000 land transactions every single year in the United States alone that involve owner finance and that are done by land buyers that are no smarter than you.
As far as the complexity of owner finance, owner finance or terms—all it means is how are you going to pay the price. Instead of negotiating the price and mistakenly believing that whatever price you negotiate has to be paid to the seller 100% at closing, what you can do with owner finance is just give the seller the price they want and show them how you would pay that price if you were able to reach an agreement. Wherever you live, I can tell you with certainty that I can buy your home for $1 million, and I can say that without actually knowing where you live or what your home looks like. If your home is worth $1.5 million, the million bucks that I'm going to pay you, I can pay you in cash right at closing. If your home is only worth $100,000 instead, I'm happy to pay you the million bucks, but we're going to have to break up the payments a little bit—let's say something like $250 per month every month for the next 500 years until it's paid off. I'll put a tenant in that property and just charge a thousand bucks in rent and cash flow the investment. And at that point, since the investment pays for itself and generates income, the amount of debt that's on that home is irrelevant. Every title company and real estate attorney in the United States has owner finance transactions moving through their office every single day. You don't have to do the paperwork; they do all that. All you have to do is approach the seller and find the terms that are going to make sense for you and the seller, and then you bring those terms to the title company, and they do all the paperwork.
If you want to buy a $50,000 piece of land and you know you can afford a $650 a month payment, just go online to a free amortization calculator like this one on calculator.net. You key in the $50,000 purchase price, you print out the 10-year amortization table at say 8% interest, you get the amortization table, and you actually staple it to the purchase agreement that you make to the seller. So what you do is you show them that this is your monthly payment—that's $66 a month—and every single month you make the payment, there's a component of principal interest, and every month you get paid $66, and it looks like this, and it looks like this, and then it looks like that as well. And at the very bottom, that last payment, you're zeroed out. And for the next 10 years, you're going to hear from me at the first of the month every month, and I'm going to be Johnny on the spot with 66. And the punchline for you is if I ever default and stop paying, you keep all the money I've ever paid you, and you get the property back too.
When you take the terms offer seriously and you take owner finance seriously, the seller will too. They're probably not going to accept it on the first call, but if you actually stick with it on the second, third, fourth call, as they get to know you and they warm up to the idea and you address all the objections that they have, what's going to start to happen is that the deal is going to take shape in ways that you never would have thought possible. But to do that, the seller has to first overcome a few specific objections that are all very easy to address, and I'm going to share them with you right here.
The seller's first objection is going to be, "Why 0 down?" And the answer is, "Because I want to pay you as much as I possibly can. I think the land is great, and I want to pay you your price, and the way that I can do that is by making payments I can easily afford, and that's what these payments are. I have a really good payment history; I just don't have 50 grand lying around, but this enables me to complete the purchase at your price at a monthly payment that I know I can afford. Oh, and by the way, there's going to be some closing costs with the title company; I'll pay all those too, so you don't have to worry about coming out of pocket."
"Well, what happens if you don't pay? I don't want to have to go through a lengthy foreclosure process." And then what you tell them is, "Oh well, what we can do is put in what's called a deed in lieu of foreclosure provision, and it's basically a part of the loan where I agree that if I ever fall behind payments, let's say 60 days, then I'll agree to transfer the deed back into your name so that you don't have to worry about going through a foreclosure. In fact, if I default on payments, that's the best thing that could ever happen to you financially in this deal, because what it would mean is that you would keep all the money that I've paid you every single month to date, and you'd get the property back too."
Then it's like, "Hey, this sounds complicated. How will I keep track of all the accounting that goes into it?" And the answer is, "You won't. After closing, we're going to give the mortgage agreement to a note servicing company, and they're going to keep a statement ledger. It's a separate third-party company that's going to take the payments from my bank account and put those payments in your bank account. That company can be accessed by phone during normal business hours, 9:00 to 5:00 pm. They'll also maintain a statement ledger with all the payment history as well. By the way, note servicing companies like this, they're really cheap; it's like 25 bucks a month. They'll just keep track of everything."
Then one of the last things you'll probably hear from them is like, "Hey, can I have my attorney look at this paperwork?" And the answer is, "Yeah, the attorney—the one who's going to do the paperwork—it's like I'm not going to do all—it's going to be the attorney that does this, so both of us are going to have the attorney look at the paperwork, and that's the way that this will get done."
By the time you get to this point in the conversation, the seller is going to start to realize, like, "Oh, this is real. Like, this buyer's for real. This is actually a good offer." But they might still need a down payment of 10, maybe 20% of the purchase price, and don't shy away from that because that's still negotiable as well. A lot of times you can get them down on the down payment to a point where it's low enough—like $2,500 bucks or something—you can actually just put it on a credit card. Other times you can find private money or friends and family money will have a first lien position, and you make the seller take second lien, or you just don't give them a down payment. And this is the thing: like a lot of these sellers, like they just want to know that you can give them a down payment, but they don't actually need the money. In fact, a lot of times these sellers, they're kind of sneakily rich, and they wouldn't even know what to do with the down payment money even if you paid it to them. And you can ask them, like, "Hey, Mr./Mrs. Seller, you know, what do you need, just out of curiosity, like what would you use the money for on the down payment?" And they'll just be like, "I don't know," like they don't know, they don't need it. And the thing is you can sell them like, "Oh, I'm a young professional. Look, I've got a good payment history, I've got a good job, I can make the payments, blah, blah, blah. I've never missed a payment in my life." Just give them a couple extra points on the interest rate and be done with it. They probably don't need the money because here's the thing: a lot of these sellers, they don't need the money as much as they need the income, because a lot of these sellers are older, retirement-age couples, married couples that are on fixed income, Social Security. So, for example, a lot of these couples, the husband might be getting $1,500 bucks a month from the Social Security check, and then the wife gets $1,200 bucks a month from Social Security. Heaven forbid something were to happen; you know what would happen to those two payments? And the answer is that one of them goes away, and the larger of the two payments is all that's left over. And so for this family, they would lose $1,200 per month every month forever when one of the two spouses dies. What do you think that they feel when they actually consider that possibility? And yet it's not a possibility; it's a definite outcome, and it's only a matter of time, especially if you're buying land from elderly individuals that own it. So what do you think they would say if you got into that conversation with them and said, "Listen, how would it feel if instead of worrying about the $1,200 that you might be losing at some point in the future, heaven forbid, I just paid you $1,200 bucks a month for the next 10 years so you never had to worry about it again?"
Ironically, one of the easiest ways for you to buy land that involves no money down closing is for you to negotiate a cash price that is so low that anybody would fund that deal, including me. Because if you can get land at a deep discount, there's all types of people that you can find online; there's land funding websites, there's hard money lenders, there's one, two, three, four, five pages of Google search results of people that are waiting to hear from you if you have a deal that's good like that. There's a lot of other land, so your thought is, "Hey, I was going to go out and buy that land; we were going to buy that land to put a house out there, but we ended up making 10K cash instead." So just do that and then keep the next one. So you present the two offers to the seller and it's like, "Look, I can get you the $50,000 bucks at closing, but it'd have to be on terms. However, if you need the cash at closing, I understand, however, and I can do that, but I'd have to be at somewhere closer to $25,000 cash." Let them talk and just be quiet.
You know the other irony is that for the seller, if they agree to your $50,000 offer on terms, they can actually still get $25,000 cash even if they sell on a terms offer. The way that works is that when they sell that land for $50,000, they trade one asset for another, because the asset that they now own is the note—it's the mortgage loan agreement. That note is an asset just like the land is, but what a lot of people don't understand that is nonetheless true is that that note is actually a more liquid asset than the land itself, meaning that note not only can be sold but it can be sold more easily than the land. There's just fewer buyers for land than there are buyers and investors for income-bearing assets such as the one that the seller is going to own. Understand that not having the money needed to buy that land, it's not a problem for you; it's not a problem for anyone. Not having money is the whole point. You may not have the money, but what you do have is much more rare and much more valuable, because what you have is you have an offer: here's what I can pay, and here's how I can pay it.
If you like this video, I want you to click this link here to watch the next video on our channel, because just because you can buy land with $0 out of pocket doesn't mean that you should pay too much in the process. So click the link below to watch the next video, and I think that you're really going to enjoy it. [Music]