Ep 59: The Profitable Seller Refinancing Investment Model with Brad Smotherman
Updated: Jun 8, 2020
You’ll find that in most cities, the people whose offices are at the tops of buildings are in the business of lending, not construction. Today we have Brad Smotherman on the show and we have a great time speaking to him about the plus sides of the seller refinancing model in comparison to doing more traditional fix and flips. We kick things off hearing about Brad’s journey in real estate through the 2008 crash moving from brokerage to construction and what caused him to settle on investing. From there, Brad compares this crisis to the last, talking about why he sees the coming months as a great opportunity for him due to all the cheap houses that will be coming onto the market as a result of it. This leads to the main topic for today, Brad’s seller refinancing model.
While Brad does fix and flips as well as seller refinancing, he prefers the latter, and he weighs in on how he withstands the risks it brings in the form of high default rates and foreclosures by getting a low purchase value on the front end. Brad is in the business of lending and right now banks don’t want to be handing loans out so another big takeaway from today is a discussion we have about lending versus borrowing money from the bank in times of crisis and who is in the better position. Wrapping up, Brad gives us a full rundown of how he would make money on a $100,000 deal by using his seller refinancing model and selling partials to note investors. Tune in for a great conversation about a widely underused model for real estate investing!
Key Points From This Episode:
Brad’s journey as a broker and then investor through the 2008 crash.
Brad’s view that the severity of this crisis pales in comparison to 2008.
How Brad accounts for a declining market as a flipper and real estate investor.
Brad’s strategy to focus on problems, not properties, as a way of getting good deals.
Why Brad looks for deals that offer equity in price or equity in terms.
How Brad is sourcing deals now compared to before; going from signs to online marketing.
Brad’s strategies for enduring risks of offering seller financing for deals he sells.
Getting into the weeds of the secondary debt world; how banks get loans off their books.
Comparing financing to fix and flip and which model Brad will use going forward.
The risks of being in construction and getting bank loans Brad learned in the last crisis.
Perspectives on taking loans and lending loans during times of crisis.
Why owner-financed deals make so much more money and are less admin.
A rundown of how Brad sells partials to note investors to keep his cash out a deal.
“We’re going to be in a situation in the next 24 to 36 months at a minimum where our ability to buy property is going to be easier, with better terms, better property, and better costs.” — Brad Smotherman [0:09:55]
“I have this crazy idea that cash pays the bills and credit score doesn’t.” — Brad Smotherman [0:22:25]
“I found that for me there is more money in financing than fixing.” — Brad Smotherman [0:31:19]
Links Mentioned in Today’s Episode:
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