Imagine building a house with just one door leading outside. Your only way out of the house isn’t a problem until something happens to block the door (a fire, an earthquake).
Structuring seller-financed notes works the same way, according to ZimpleMoney CEO Ted Tekippe.
If your only plan is for the borrower to pay off your seller-financed loan on schedule, then you’ve built yourself a one-door house.
The choices you make when structuring a seller-financed note determine how many doors you can open to a better future outcome.
As part of a recent live webinar, Ted discussed seller financing exit plans with industry expert Nathan Turner. You may know Nathan from his annual conference Diversified Mortgage Expo (which is a lot of fun in Nashville!), or from his podcast with David Putz called the Real Estate Notes Show.
What you may not know about Nathan is that he’s been in this industry for over 15 years and in that time has brokered or bought over 500 seller-financed notes of all shapes and sizes. He’s seen good, bad, and ugly note portfolios over the years and brought that depth of knowledge and experience to the webinar.
A Seller-Financed Note Without An Exit Plan Isn’t A Complete Note
Setting up your seller-financed notes incorrectly from the start reduces its value when you’re looking to exit. Together, Ted and Nathan discussed the building blocks of notes ready for successful exits, from borrower underwriting to proper pricing, documentation, and payment tracking.
Nathan was recently presented with a note buying opportunity of a portfolio with over 80 seller-financed notes, and shared the major red flags he uncovered doing his own due diligence. He also shared insights from an experience setting up seller financing with a borrower who intends to refinance in six months to a year, and why borrower refinancing is a best-case scenario exit plan.
Every ZimpleMoney webinar allows registrants to submit questions ahead of the event for Ted and his guest to answer live. The questions submitted for this webinar ran the gamut, and Ted and Nathan answered them all.
Here is a sampling of the questions answered in the webinar:
- Lilly asked, What obligations would a seller have when doing seller financing?
- Don asked, What % down payment and interest rate do you recommend to charge your seller finance buyers?
- Lee asked, Do I need a mortgage license to invest in different states?
- Stephan asked, Is there a nationwide service provider for servicing the notes?
- Jacob asked, What is the best balloon term?
- Karen asked, Do you pay referral fees?
- Michael asked, Are seller-financed note payments really passive income?
- Vicky asked, How do I find note buyers?
- Steven asked, What are the best places to buy and sell notes at?
Want to make sure you’re invited to join ZimpleMoney’s next webinar? Let us know by filling out our contact form here.
Allison Murray is a recognized payments and financial technology expert with more than 10 years of leadership experience in payment technology and financial services infrastructure. With a proven track record of developing frameworks that drive value creation for fintech companies, Allison’s technical knowledge and industry foresight have earned peer recognition across the payments industry. She has spoken at leading fintech conferences including Money20/20 and Finovate, received the Los Angeles Business Journal’s Women’s Leadership Award in 2020, and actively contributes to the fintech community through NYC Fintech Women and the Women’s Network in Electronic Transactions (WNET).
Disclaimer: This article is for general educational purposes only and does not constitute legal, tax, or investment advice. Consult qualified professionals before structuring or investing in any private loan note.