Today in Noteschool, Eddie Speed and Joe Varnadore talk about Buying Property with Seller Financing.
“What if I buy a piece of property and I agreed to pay them for over a long period of time and before I ever owed them any money, I already collected the money on the property with good profit before I ever had to pay anything out.” - Eddie Speed
Eddie taught hundreds and hundreds of real estate investors this strategy over the last couple of years.
To learn more from Eddie Speed, continue watching this video.
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Joe Varnadore (00:00):
Welcome to this week's episode of NoteSchool TV. My name is Joe Varnadore and we go live every Wednesday at 11:05 AM central time. So we deliver quality content about Note business every Wednesday live. So make sure and like share and subscribe and click on that bell notification so that you will know exactly when we are live. You'll get that notification. Also, we have an interactive show here, so share your questions and comments. And if you're brand new to NoteSchool, you can check us out at www.NoteSchool,.com/TV. So today is Mr. Eddie Speed and I, Eddie is the founder of NoteSchool,, and we talked a bit last week, Eddie, about buying properties on terms, right, and what that looks like. And so this week we're going to get into selling properties on terms, and then next week we've got a special guest that's going to come home, going to come on and share with us the property that he did. And it actually won our case study contest at NoteExpo, Note Appreciation event last week. So we're excited about that as well.
Eddie Speed (01:43):
He did, and we're excited to have him on next week. So last week we talked about buying properties on terms and why that was important. We talked about you know, that real estate investors, if they're only making a cash offer, trying to buy a house at a discount, they sorta have a one strategy business. And we talked about moving a strategy over and adding saying, Mr. Seller, I can pay you more for your property, but I'm going to have to dictate the terms. And obviously the way you say it and how you approach it has a lot to do with your success in doing that. So Joe, the reason that works, is because I can pay any price for a piece of property if I get the right terms, right?
Joe Varnadore (02:33):
That is correct.
Eddie Speed (02:34):
A good looking shirt you're wearing, man.
Joe Varnadore (02:37):
Well, thank you. A little busy, right? I like that. That's a really blight, bright blue. I love that, man. I'm going to go out and get me one of those.
Eddie Speed (02:45):
So, yeah. So that's a good looking shirt, Joe. I would buy that shirt from you for 500 bucks.
Joe Varnadore (02:52):
Eddie. I'll go ahead and I'll ship that to you overnight.
Eddie Speed (02:57):
Do that. And I'll pay you a dollar a year for the next 50 years.
Joe Varnadore (03:03):
Wait a minute. You told me you'd pay me 500 bucks.
Eddie Speed (03:06):
Well, I'll pay you a dollar a year for the next 500 years.
Joe Varnadore (03:09):
Okay. All right. That's the analogy, folks.
Eddie Speed (03:15):
So understand that, you know, we can pay any, and so Joe, it, wouldn't it be cool. Think about this. What if I bought a piece of property and I agreed to pay them over a long period of time and before I ever owed them any money, I had already collected the money on the property with good profit before I ever had to pay anything out.
Joe Varnadore (03:42):
So you can really do that. Huh? Eddie?
Eddie Speed (03:45):
That's the American dream, Joe.
Joe Varnadore (03:46):
You're absolutely right. So I could make, literally I could make some money now. Right. And I could make money in full time.
Eddie Speed (03:55):
Yeah. So here's what we've learned. We've taught hundreds and hundreds of real estate investors, this strategy over the last couple of years, thousands Joe, to some degree or another. So, but we've taken people. We've taken well over a thousand people into some fairly in-depth training on this because they said I'm a real estate investor. And what do I do when they won't take my cash offer? Essentially I throw it in the trash can. And that's not a good plan. Right? So from that, we've learned that there is a another way to do it. And that is to buy on terms. But if I buy it on terms, Joe, what do I do with the property? Well, Joe, I could rent it.
Joe Varnadore (04:45):
Yes you could, Uh-huh.
Eddie Speed (04:45):
I don't believe that for the most part in the next five years is going to be the perfect rental property cycle. Okay.
Joe Varnadore (04:54):
I agree. Yup.
Eddie Speed (04:55):
I Think that we've hit a top of the market and I believe if you, instead of renting it, what if you could sell it, Joe, and essentially get a down payment from a buyer they paid about 20% down.
Joe Varnadore (05:09):
Right.
Eddie Speed (05:09):
Now, somebody on this show, Joe is going, Oh, that's BS Eddie. You can't actually do that. What if I said the average conventional mortgage last month made an average down payment to get a conventional mortgage of 19% down.
Joe Varnadore (05:28):
So when he that's about 38,000 to $40,000 on a $200,000 house, but that's the reality from the research, right?
Eddie Speed (05:37):
We know this, Here's another thing who in the world could I Seller Finance? who needs Seller Financing? Why did they like, why don't they just go get a Fannie Mae Freddie Mac loan, right? Well, here's the facts. The facts are that conventional mortgage lending, the people that could get a mortgage in February before the virus outbreak and the people that can get a mortgage in October or November, right where we are right now, just about 35% less.
Joe Varnadore (06:11):
Right.
Eddie Speed (06:11):
So it's left this pool of people outside of who can get conventional financing. And Joe, we tend to call these people just missed.
Joe Varnadore (06:19):
Right.
Eddie Speed (06:19):
Right? So here's where we are as a market condition, conventional lending, while it is very active, has drastically tightened their underwriting. So they're refinancing perfect people. Let's just be fair about it. That's kind of where we're at.
Joe Varnadore (06:36):
That's right.
Eddie Speed (06:37):
And so what they're not doing is they're not financing the people that could get a mortgage last year. And we see that as a terrific opportunity, Joe, I have a chance because of the way that I bought a piece of property and I control that property long-term, and I don't have to pay for it today. I pay for it over time. I have the legal right to resell it, wrap it. As long as I make my underlying mortgage payment, when I'm supposed to, and I will.
Joe Varnadore (07:08):
Right.
Eddie Speed (07:08):
Then I can go resell it and get a good down payment. And then I can charge a higher rate than I'm having to pay in that. What your bank does, Joe, it does your bank. They pay me 2% interest and charge you 5%, right?
Joe Varnadore (07:31):
More like Eddie, they pay you a half, maybe in charge.
Eddie Speed (07:37):
I was just, I was being liberal with the dollar.
Joe Varnadore (07:39):
And they're happening. And that happens multiple times every day. And people are happy with that. So Eddie, what you're saying is we can go in and we can buy a property. Like we talked about last week and we can pay, you know, we can buy it for $160,000 cash, or we can pay $195,000 on terms and tie that up and then have that property. And then we go out and typically when we sell, we're getting, if we did make a down payment with our seller, the person we've bought it from most of the time we can get it at least twice as much as we've paid down to our seller. And then we're going to get a cashflow every month from that deal.
Eddie Speed (08:28):
You make money today and money over a long period of time, right? Which is what we believe real estate investing should be. It's Okay, Flipping houses is fine. We're not trying to tell people don't flip houses. We're telling you if all you do is flip contracts and you don't keep any long-term wealth. Kind of missing the real meaningfulness of real estate investing. Right? And once again, people say, well, I like to buy rentals, but we believe that we've entered into a seller finance cycle because of all of these market conditions, we believe we've entered into a seller finance cycle that we can make a lot more money over a period of time as the bank, more money today, more money tomorrow, then we can just keeping it as a rental. And Joe, I can do 10 times the amount of assets.
Joe Varnadore (09:24):
Right.
Joe Varnadore (09:24):
Joe, with my shop services, 1200 Notes,
Joe Varnadore (09:28):
Right?
Eddie Speed (09:29):
We service between, you know, 702,000 Notes, depending on where we're at and you know how much inventory we've got, but I can serve as 1200 notes easily, in my shop with my staff. Could I serve as 12 on a rental properties?
Joe Varnadore (09:49):
That'd be a nightmare. Wouldn't it?
Eddie Speed (09:51):
10 times the staff wouldn't it. So understand with a skeleton staff, I can scale the business and we're teaching you to qualify people, to do these Notes in such a way. I'm telling you, they are really good people. They have good. We're not, sometimes people think Seller Financing means substandard real estate and substandard buyers. That is not what we teach. We teach you structuring techniques, how to structure the underlying financing in such a powerful way that you can resell it. And you're giving this buyer a great deal. You're giving him home ownership, Joe.
Joe Varnadore (10:28):
Right.
Eddie Speed (10:29):
I mean, what could be better than that?
Joe Varnadore (10:33):
Well, you're exactly right. And so Eddie, instead of just, you know, if we flipped the contract, we've made $20,000 once. But what we see our students doing over and over and over again is making $20,000, 15 to $25,000 today. And then somewhere between 350 and $550 a month for the next 30 years. Right. And that's really, and you're the bank, right? You're the bank.
Eddie Speed (11:02):
Well, let me ask the audience a question. If all things were equal. Would you rather be a landlord or the bank?
Joe Varnadore (11:16):
Right.
Eddie Speed (11:17):
Things were equal. The answer is Eddie, I'll take the landlord every time. So we've entered into a market cycle. Now I've been doing this forever. Joe. You've been doing it for 30 years. That's almost forever.
Joe Varnadore (11:30):
Right.
Eddie Speed (11:30):
I've been doing it 40 years. Right. And if you really think about this business and all the times that we've seen, there are chapters in our industry, right. There're time, there're seasons, there's harvest seasons. And there's seasons that aren't as harvest. And we've done well in the business in the last few years because we've really perfected some strategies, right? We've really perfected it. But the stars have aligned Joe.
Joe Varnadore (12:03):
Right.
Eddie Speed (12:03):
The stars have aligned where people selling a property, we'll carry the financing for you because they get their price. Right now, we fully understand if said incorrectly, you're going to get the wrong answer, right? If you say it, if you position that wrong with the seller, they're not going to sell to you. But if you position it correctly, we are highly convinced because of hundreds of case studies that we have and see on a weekly basis, we were highly convinced that if said correctly, you can get somebody to do it. Now here's the cool thing, Joe, there is a lot of real estate investors that kind of have a acquisition property acquisition machine built. Right.
Eddie Speed (12:52):
And they don't have anybody on their team that can do this.
Joe Varnadore (12:55):
Correct.
Eddie Speed (12:56):
Right. Well, we figured that out and then we started training students to go help the real estate investor to go be his outsourced acquisition specialist. We call him a designated hitter right now, once you do that and you have that in place, then the other side is you need to resell the house. Now, Joe, the problem is, Oh my God, I gotta resell the house. So the answer is yard sign and Facebook marketplace, 99% of the time is going to get you where you want to get.
Joe Varnadore (13:38):
Absolutely.
Eddie Speed (13:38):
A yard sign. And Facebook marketplace is going to get you where we want to get. And we have lots of students and I own businesses or I'm a partner in businesses that are very active in real estate, investing, buying, and reselling, where we do this. So it's not like this is a mystery to us. We live and deal in this every day in the business. And in what we used to hear Joe about a year ago is I'm in Phoenix. And I can't find anybody with that kind of down payment or I'm in South Carolina. And I can't find anybody with that kind of down payment or I'm struggling with who is this penalty box buyer you're describing. You know what I'm saying?
Joe Varnadore (14:26):
Yep.
Eddie Speed (14:27):
At the moment, Joe, we're not hearing any of that objection.
Joe Varnadore (14:31):
No.
Eddie Speed (14:33):
Like we're finding people consistently getting 15 to 20% down. They're finding buyers that have been left behind by conventional mortgage lending that are really good people. I mean, they're not anywhere near bad. And so this is that season we entered that season and you know, for some people listening on here they may say, well, Eddie, I love the idea of creating my paper on real estate. I just don't wanna, I don't wanna, I hear about these real estate investors, but it sounds like a lot of brain damage. And the answer is you are correct. It is a lot of brain damage to run a high volume, real estate investing business. So go over there and take their lead and go do something with it. Right. But the deal is, is the exit and reselling today, Joe is so strong. That exit today is the best I've seen. I believe probably 10 years.
Joe Varnadore (15:34):
I totally agree. You know, and Eddie it's well stock into Scott, one of our students in the Phoenix area, you mentioned Phoenix. And he just closed on a deal in October where he had bought it, you know, and then he sold it, you know, resold it using Creative Seller Financing and Eddie. He said that he, when he posted it to Facebook or to yeah, Facebook marketplace, he had five responses to his ad within an hour and sold it the next day. Right. So, you know, it's not smoke and mirrors. It's just, it's using, you know, practical, private loan available to qualified buyer with a large down payment, Versus the old tried and true, Hey, we'll sell it to anybody. You know, no cash, no problem. Right? No credit, no problem. That's not our avatar on this deal.
Eddie Speed (16:26):
Yeah. So what Joe's saying here is the way we position offering Seller Financing is different than you probably have heard of in the past. Now let me give you a little history. Okay. I bought a few portfolios of Seller Finance Notes in the 1980s. I few as in, you know, I don't know a dozen or three dozen, I don't remember them I't's been a long time ago, but in the 1990s, I specialize in working with real estate investors and buying portfolios of Seller Finance Notes. And what it morphed into is the early days of NoteSchool, I set up the Note System for home investors and a lot of other real estate investor companies with a recipe and a formula of how to create Seller Financing. Okay. Well, in that process, I figured out I had to help them with how to market for the best buyer out there looking for a piece of property.
Eddie Speed (17:28):
Because the habit that I noticed over and over and over is when people would market for Seller Financing, they would sorta hang out a neon sign saying, I'm looking for substandard.
Joe Varnadore (17:40):
Right.
Eddie Speed (17:41):
You know, we've all seen Joe, we've all seen those ads.
Joe Varnadore (17:45):
Yeah.
Eddie Speed (17:45):
We've seen the ads that say bad credit, no credit, no problem. What you just said. Right. Or even let me just say this, Joe, if you put just Seller Financing in an ad, if you put just Seller Financing in an ad, the guy that sees the ad, he looks at it and goes, well, what does he see? He says, I see non-qualifying.
Joe Varnadore (18:07):
Right.
Eddie Speed (18:10):
Right. And so we found out if I could make a different demographic, call your marketing because you positioned it in such a way. And isn't that what marketing is, Joe is just messaging in a way that attracts you to your real customer that you want.
Joe Varnadore (18:27):
That's right.
Eddie Speed (18:28):
Right. And so if we could do that, we could change the efficiency. So we moved away from even putting Seller Financing in the ad. We put in the ad private financing for deserving buyers with large down payment, right. Now, why don't we said private financing, Joe is, it is private financing. It's our private financing. In fact, this industry has been called the private money mortgage business, right? Because the private loans, not institutional loans, but the answer is Joe. It suggest that we have a different way of lending you money than Fannie Mae, Freddie Mac. We're more flexible than them, but it does suggest that there is a qualification process, right? And I want somebody to read that ad and go, you know what? I'm a deserving buyer. I'm reading this ad. I'm a deserving buyer, Joe. I need to call you. I need to contact you on Facebook marketplace. I'm gonna pop you a message because I need to, I'll guarantee you I'm a good credit risk. I just happened to be self-employed
Joe Varnadore (19:42):
That's right. One in five people in the US are, and you know, Eddie, the other part of that, and you mentioned it, we are going to make sure they are a qualified buyer. We're going to make sure the loan is safe act compliant, right? We're going to use an RML in order to, in order to make sure that we are, you know, making sure that buyer can repay our bank for the next 30 years.
Eddie Speed (20:07):
Let me say this about qualifying a buyer. Some people have heard of seller financing, and I've heard this said to me countless times, and when they're playing it back to me, when they sell or finance, their Seller Financing strategy, Joe was more a strategy to get rid of their property. It was not a strategy to gain a customer for their bank for the next 20 years.
Joe Varnadore (20:34):
Correct.
Eddie Speed (20:35):
Now, listen, we have lots of techniques showing you once you have good notes of how you can create some liquidity with it, right? You need to go get some of your capital back or you need to go gather up some of the Notes with the cashflow so that you can then go take a bigger lump sum of money and propel yourself. All of those things that we completely understand, right? It starts out with a good Note that you are highly, highly likely to get paid back. And then you have a ton of latitude of what you can do with it.
Joe Varnadore (21:11):
That's right.
Eddie Speed (21:11):
Joe, let me ask you a question. What would it be like, if you woke up on January 1st, every year and you knew you had enough Note payments coming in, but your overhead was covered for the entire year on the first day of the year.
Joe Varnadore (21:31):
Imagine how by having that Eddie, how you, cause you've been talking about, you know, doubling your net worth over this pandemic. Imagine having that coming in and how creative you can be because you you have your bills covered for the year, right?
Eddie Speed (21:50):
Yeah. There is. There is no doubt that this is the strategy that I want people to build. Now people say what, Eddie, I need transactional money. We're not ignoring that. That's what the down payments are for. Or when I buy a property, how do we structure the down payment? We can show you a lot of strategies of how to structure the down payment, but it's not really a down payment. It's really that you're using some private capital to fund the money to the seller. So it gives him money at closing. It's just not your cash.
Joe Varnadore (22:28):
That's right.
Eddie Speed (22:28):
Right. There's you know, and people say, well, man, all that stuff sounds complicated and stuff, you know, that's why we teach with case studies?
Joe Varnadore (22:38):
That's right.
Eddie Speed (22:38):
I mean, case studies are the easiest way, Joe, right now, if somebody comes to a three-day class, we are going to, by the third day, we're going to take about eight different strategies and pull them all together and use literally eight different strategies on one case study.
Joe Varnadore (22:58):
That's right.
Eddie Speed (22:58):
Right. And people say, you can't do that. Oh no, we do it all the time. And we're, it just shows us when we work hard at it. You and I bet, you and I are on the phonem an hour today on a teaching strategy that we're going to implement here in the next week or so. Right.
Joe Varnadore (23:15):
Right.
Eddie Speed (23:15):
We do this on a daily basis. So we it's, we've learned how far we can take somebody. If the way we teach becomes so clear.
Joe Varnadore (23:26):
That's right.
Eddie Speed (23:26):
By the way, Joe and I, we do these Deal Labs every week. We had a Deal Lab yesterday. One of them was exactly the story that we just told you, literally exactly the story, which is the student did exactly we said, and went to Facebook marketplace. Now he's going to sell to a landlord 50% down.
Joe Varnadore (23:52):
Correct.
Eddie Speed (23:53):
50% down. Right. And so, then he's going to end up with a note and we talk about how we could exit with a Note and different things he can do. I mean, he's got a loan, that's very salable, or he can borrow money against it. Cause he's got a loan. The guy qualified buyer paid 50% down. And the next case study that came on right after that one with another student is she's going out and finding free and clear landlord property. Right? Nice houses. These aren't junk.
Joe Varnadore (24:24):
Right.
Eddie Speed (24:25):
They've owned them. The truth of matter is whether the landlord admits it or not they're burnout, they want the entire price for their property. They want Zillow price. Right. And Joe laughed, and I said, well, tell him to call Zillow. They got to play it tell them to call, They want you here. I don't think Zillow will do that.
Joe Varnadore (24:51):
Ooh. Yeah.
Eddie Speed (24:57):
So the idea is, this is exactly where we want to show people. There's opportunities. Listen, we're not, there's nothing wrong with a wholesaling business. There's nothing wrong with a rental property business. We're just saying that there's market conditions, Joe, that are ripe for what we're doing. And the thing that I love about it is Joe. I make this statement to a new student and I make it because it's the statement that my father-in-law taught me 40 years ago, that started me in the business. He said, this business will be good to you a long time in the future.
Joe Varnadore (25:37):
That's right.
Eddie Speed (25:37):
Right. And that's because you're getting these checks. You're getting monthly payments. All right, Joe bookend is here. My man.
Joe Varnadore (25:45):
All right. So guys, we have learned today that yes, we can buy a property with terms, right? Buying on terms. We talked about that last week, and then we can resell that property on terms as well, using a wrap agreement. And by the way, we have all of the paperwork that goes along with that. And you can not only make money today, but you can make money and income stream forever for the next 30 years. And that's what we want to see for your business, right? We want to see you become the bank. And there is something that is freeing about that. It is true passive income. So as I said next week live, we will have one of our students that won a case study contest with a deal that he did in California here just a few months ago. So stand to stay tuned for that next week. So remember to subscribe to our YouTube channel, we go live here on NoteSchool, TV every Wednesday at 11:05 AM central time to learn more about NoteSchool, go to www.NoteSchool,.com/TV. And guys, we will see you next week. We're going to have a great episode as always, and we've got a special guest, so we will see you next Wednesday at 11 Eastern, by 11 central bye now.
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