Jun 4 • Acquisitions & Lead Gen
Seller Financing: How to Structure Your First One
Seller financing is one of the most powerful tools in real estate — and most investors never use it because they don't know how to ask.
Let me break it down.
When will a seller actually consider it?
Not every seller will. But certain situations make it way more likely:
- They own the property free and clear (no underlying mortgage to pay off)
- They're retiring or downsizing and don't need a lump sum right now
- They've owned it for decades and a big sale will trigger a massive capital gains hit
- The property has been sitting and they're tired of managing it
- They want steady monthly income — like their own private annuity
If any of those boxes are checked, seller financing is at least worth bringing up.
The core terms you need to understand
Every seller-financed deal has five levers:
- Price — Usually closer to asking, because the seller is taking on risk by carrying the note. You're trading a discount for better financing terms.
- Down payment — Typically 10–30%. Enough for them to feel secure, not so much that it kills your cash flow.
- Interest rate — Often 5–8%, negotiable. Lower than hard money, higher than a bank loan. Fair for both sides.
- Term — How long the loan runs. 5–10 years is common on commercial. Longer terms mean lower payments.
- Balloon payment — Most seller-financed deals have one. The full balance comes due at the end of the term. You need a plan — refinance, sell, or extend.
How to pitch it so it's a win for them too
Don't walk in asking for a favor. Frame it as a solution to their problem.
Something like: "I'd love to find a structure that works for both of us. If we did seller financing, you'd avoid a big tax hit this year, generate consistent monthly income, and still get full price for your property over time."
That's it. No pressure. You're just showing them an option they may not have thought about.
The traps that bite first-timers:
- No balloon plan. That balloon is coming whether you're ready or not. Know your refinance path before you close.
- Skipping a title search. The seller says it's free and clear — verify it. Always.
- Loose paperwork. Use a real estate attorney to draft the promissory note and deed of trust. Don't DIY this.
- Ignoring due diligence. Seller financing doesn't mean skipping inspections. You're still buying the property — with all its problems.
- Not recording the deed. The deed needs to be recorded in your name. If it's not, you don't own it.
The bottom line: Seller financing works because it solves a real problem for sellers who don't need cash right now. When you understand their situation and frame the conversation around their benefit, the "ask" becomes a lot easier.
If you're trying to figure out how to structure your first seller-financed deal — or you want to learn how to find and close on commercial properties that actually cash flow — I do one-on-one coaching and I'd be happy to walk through it with you. Just DM me and we can talk through where you're at and whether it makes sense.
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Seller Financing: How to Structure Your First One
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