You will be surprised how many people own their properties free and clear, and are willing to finance the entire amount or a good part of the mortgage to make the deal happen. Usually, though, you will be getting secondary financing from the owner. That means you get the majority of the money (the first mortgage) from another source, like a bank, and the seller will give you the rest in the form of a second mortgage.

There are four types of owner financing to that you could ask for:

Type 1: Ask for the principal to be paid at certain later time. If you notice, I didn’t mention monthly payments for interest; only principal be paid at a later date. Why pay monthly payments or interest if you don’t have to?

Who would go for this? Most sellers won’t… but some will. You only need one to get yourself a great deal, so ask for this each time. If they do insist on interest or payments, go to the next offer.

Type 2: Principal divided into monthly payments. Again no interest; you’re paying off 100 % principal.

That’s a great deal for you!

Example: A seller agrees to finance $100,000 over 20 years. 20 years a time 12 months per year is 240 months payments. $100,000 divided by 240 equals’ payments of $417 per month.

Type 3: Ask interest-only payments, with the principal to be paid with a “balloon” (also called “bullet”) mortgage in 5 years.

Example: You can offer 8% interest on $100,000 of owner financing. Multiply $100,000 by .08 and get $8,000 by 12 and get a monthly payment of $667 per month. You then must pay off the entire principal balance at the end of the fifth year. You would typically do this by either do this by either selling the property or refinancing it.

Type 4: If the owner insists on getting principal and interest, then you would structure the deal accordingly. Owner financing $100,000, 8% interest, amortized over twenty years with a five-year balloon.

Your principal and interest payment is amortized over a long period-twenty five years because the longer you make the amortization period, the lower the monthly principal and interest will be.

Owner financing is a great strategy to purchase real estate, whether it’s commercial, multi-family apartment properties or single homes. Ask and negotiate with the seller and you would be surprised how easy it may be to start your property portfolio today.