There is a crisis going on in America currently,
a crisis that affects millions of people and
one that real estate agents might play a role
in solving or mediating, but you're not going
to hear it from your normal real estate agent
at all. And this crisis that I'm talking about
has nothing to do with the Middle East or debt
spiral or anything. It has to do with retirement
and how people don't have anything saved for
retirement. And this is a big, big problem as
more and more boomers reach retirement age. Gen
X is up next for retirement. And the average
retirement savings is like $100 ,000. And that
is pretty good. And most people don't have two
nickels to rub together in retirement other than
the equity in their home. And so there are tons
of people sitting on a lot of equity. And it's
really become the default retirement savings
plan for... Americans because they don't have
anything else saved. And we can talk about the
reasons for that. They're complicated. There's
a myriad of reasons. But the fact is people are
relying for the sale of their home a lot of times
to provide for them in retirement. And so where
does that leave us as real estate agents serving
a population of people that are in this position
where all their equity is trapped? And it's not
just people looking to retire. It's a lot of
people's wealth is in real estate. It's in the
equity in their homes. And so what I'm going
to speak about today. with this retirement crisis
is for people that own their homes outright and
what they can do to secure monthly income in
uncertain times. And what we don't often talk
about, especially as real estate agents, because
most real estate agents have no idea about how
to do this or anything about it, is that when
you own your home outright, like many people
do, especially people getting ready to retire,
they might have lived there for quite a long
time, have tons of equity. and are looking to
downsize or looking to fund their retirement
lifestyle in some ways. And so what they typically
do and what real estate agents tell them to do
is to put their home on the market and sell it
and cash out and collect their equity and go
about their business. And that's sort of their
retirement income. But here's where it gets a
little more complicated because there's other
ways to access that equity that. can be more
beneficial, potentially more beneficial to a
seller and provide them with more specific, consistent
income. And I'm talking about seller financing.
So I'm talking about you being the bank, you
selling your home, but instead of just selling
it back to the bank who's going to sell it to
someone else, you are going to hold the note.
You are going to collect payments with interest.
You are going to be able to work out the terms
you want. And then you are going to be able to
collect a consistent monthly income from that.
And no, you're not renting the place. You are
collecting a mortgage payment. Now, for any realtor
out there, when somebody comes to you, if you're
a good realtor, my first question is going to
be like, why are you selling? I don't think you
should ever sell if you don't have to. Because
what happens is, you know, people typically they
pay, they play that sort of middle class trap
where they build equity and then they pour all
that equity back into a place where they got
to spend a monthly. They upgrade their home and
then they've lost all that equity. And now they
are doing the same rat race again. They have
the same giant payment and then they're just
stuck. So all their equity is trapped again.
But for people that own their own home, they
have a lot of options because once you own your
own home, you can kind of do what you want with
it. You can sell it for magic beans. You can
trade it for a Ferrari. You can do whatever you
want with it once you own it. It's yours. And
your average typical real estate. agent, buying
and selling. And people too, owners of homes,
buyers of homes, they only know one way to buy
or sell a home and that's to get a buyer with
an approval, pre -approval letter from a mortgage
company, the bank, the bank, the bank does everything.
And I think it's going to be a lot more empowering
for some people in certain circumstances, especially
if they own their home. I'm not talking about
if you still have a mortgage and wraparounds
and lease options and other ways to do owner
financing. I'm just talking about... about straight
seller financing where you own your home, and
then you're going to sell it to somebody directly
and collect those payments with interest, you
are going to be the bank. That's what I'm talking
about. Because let's say I'm looking to retire,
and of course, to access that equity, I believe
I need to just sell it back to the bank who's
going to sell it to somebody else. I get a big
old payment. I get a big old equity payment.
large and in charge. Well, for a lot of people,
that might work out for them. That might be the
choice they want to do. They might want to put
it towards other things. They might have plans
for that money. But what happens is, let's say
all your equity, all your retirement is in your
home. Which, without being too judgmental here,
if all your retirement income is trapped in the
equity of your home, you haven't done a great
job saving. You have not been good with money.
You have not managed your money well. That's
why it's all in your home. You don't have anything
else. So now what are you going to do with this
windfall of equity that you get? I can tell you
what you're going to do. Most likely, you're
going to piss it away somehow. You know, one
of your uncle Johnny is going to have a great
idea of investing and you're going to give it
to him or your kids are going to ask you for
a loan. You're going to give it to them. You're
going to see it again. And so having a big equity
windfall in retirement for a lot of people, I
don't see working out very well because you don't
know what to do with it. You don't have the history
of demonstrating that you know what to do with
the windfall. It's like a lottery winner. Like
most people that win the lottery go broke. Because
they don't know what to do with a windfall. They
have no idea what to do with this large amount
of money. So if you are going to do seller financing,
this provides you with a number of advantages.
Is it simple? No, not necessarily. Is it as complicated
as people may make it out to be? I also think
no. So it involves a little more research. It
involves a little more due diligence. It involves
hiring a real estate attorney who specializes
in these things. Disclaimer, I am not an attorney.
I am a guy on the internet. My name is Doug Varinas,
licensed real estate agent in Washington and
Oregon. If we haven't met before, I am not an
attorney. I'm a guy on YouTube. But if I'm looking
to retire or I own my home in any way, even if
I'm an investor, I think this is a really good
exit strategy if you're looking for more consistency.
in income every month instead of getting that
windfall or 1031ing into another property. I
think if you're an investor, you may have more
practice with dealing with these large payments,
large amounts of money, and you know how to allocate
capital. But if you're a Joe Schmo retiree who's
trapped in their home equity, that's your big
nest egg, you're going to blow that. So I'm offering
you a potential alternative. Again, consult with
your people about this. But basically what seller
financing is, is you own your home outright and
you can do what you want with it. So you can
put it on the market and you can use a real estate
agent or you can not use a real estate agent.
You can kind of give them a finder's fee because
you can pay them a straight commission. There's
a lot of ways to work that out. But ultimately,
it would involve you selling your home. to somebody
at a certain price, at a certain interest rate,
and for a certain amount of time. Now, because
you are in control of your home, there are a
million ways to structure this sort of deal.
So if you did need a certain amount of windfall,
like if you're looking to downsize and you needed
a down payment, well, part of the seller financing
could be requiring a 10, 20... 30 % down payment
from the person who's gonna purchase it from
you. That could be certainly a portion of or
a part of the deal that you could structure.
in to make it worth your while to get some money
up front to get you going in your next stage
of life. And then you're collecting the monthly
payments plus interest. So it works similar to
a mortgage. You have a purchase price. A lot
of people are looking for seller financing for
whatever reason. They don't qualify for a traditional
mortgage. Maybe they're contract workers. There
could be any number of reasons. And or they're
like me, where they just they don't want to pay
a bank to purchase a home. Like as an investor,
I like to get seller financing or some kind of
alternate creative financing, they call it, so
I can put less money into a deal or I can structure
it the way I want it, especially in a higher
interest rate environment like today. You can
potentially get a higher purchase price for your
home overall if you're willing to accept a lower
down payment or lower interest rate, because
those are really the three factors in this transaction.
You have a purchase price, you have an agreed
upon interest rate, and then you have the terms,
like how long are you going to do it? How is
it structured? A couple of options are the straight
30 -year amortization schedule where you have
an agreed upon price. And a lot of times you
can command a premium for your home because you're
offering the seller financing and because you're
offering a lower interest rate as an incentive
to that. buyer, you can ask for a higher purchase
price. That's great. You don't have to go through
this whole price reduction, paying all these
fees. You can get that higher price point. And
so that's going to be really advantageous for
a seller. And again, you can capture the interest.
So right now, interest rates are like 7 % or
something. If you charged 5 .5%, 5%, you can
hold on to that note and you collect that 5 %
for 30 years or whatever. You can will that to
your descendant. If you pass away and you're
getting that consistent monthly. And so you are
getting that consistent income and you're capturing
that percentage. And if you know anything about
an amortization schedule on a 30 year mortgage,
like the first 10, even 15 years, the majority
of the payment is interest. So in the event that
your seller defaults, it returns back to you.
You still own the property. And so this is going
to be so you're going to be collecting that.
consistent monthly income for the entire 30 years.
Now, you can structure it different ways where
you can capture those terms in the first year,
two years, three years, five years. And then
at the end of that, you can request that there
be a balloon payment written into the agreement
where you get the entirety of your equity paid
out at the end of that. Period. So it basically
would work the same way as a 30 year mortgage.
They would pay you a down payment. You would
collect the principal and interest. And then
at the end of that defined period, they would
either have to they would have to basically refinance
or sell or something to get you your money. So
you could structure it to where you have you're
holding that note for a couple of years. And
then after that. you're having a balloon payment
to get all your money back. So in short, it's
an option for people who want consistent income
and to capture that monthly interest. Because
when you just sell, you're giving that all back
to the bank. You're losing it, especially when
you own your home. You're giving it all right
back to the bank. And unless you really need
that windfall and you have a plan for it, a lot
of times it might be more advantageous to, in
fact, have a deal structured like this to where
it guarantees you income. People are constantly
talking about Social Security and Social Security
is not going to be there. And people talk about
consistency of payment and retirement from pensions
or annuities or some kind of retirement advice
that gives them consistent income that has a
high value. But they don't think about their
home that way. It doesn't occur to anybody and
nobody is talking about it. Investors are talking
about it, but real estate agents aren't talking
about it. And I don't hear a lot of talk about
that in the retirement community. Tell me if
I'm wrong. If you have done seller financing
on your home or you know someone who has, I would
love to hear about it in the comments. If you
want to do this or you have a desire to do this
with your home, you're in the Vancouver area
or not, I'd love to talk to you about doing that
too. I would love to work on selling your home.
this structure. I think it's really interesting
because the world is moving towards decentralization
and direct -to -consumer and getting rid of middlemen
who don't provide value and for us to keep our
assets. over the long term and not to just give
them back to an institution like a bank, again,
might work for somebody, works for a lot of people,
but it might not work for everybody. And so,
again, my name's Doug Varinas. I'm a real estate
agent here in Vancouver, Washington, and licensed
in Oregon. If you're thinking of buying... selling
or investing, I'd love to hear from you and just
have a conversation. 100 % no pressure. We can
talk about real estate. That's what I love to
do. And at the end, if you want to work with
me, great. If you don't, that's great too. No
worries. I hope this has been helpful. If it
has, please do a like, a subscribe and a share
because that helps me out. Please post any questions
in the comments. But I think this is really interesting.
Again, you're going to need a real estate attorney
to help you drop this paperwork and to go over
it. So that's going to be a fee for you. But
a lot of times you can sell these directly to
people. And, you know, there might be you might
have to pay a real estate agent sort of a finder's
fee or like a transaction fee for that to help
you. You definitely have to pay for the attorney,
but it's not as complicated. as it seems because
like a mortgage, you know, it's pretty basic
in the underlying structure of it. You just have
to basically wrap your mind around like you are
the bank. But once you do, I think you might
start seeing how you can structure these deals
very creatively to get everything you want. And
it really makes it a win -win situation because
recently I've been in a situation where I wanted
to buy a house and I wasn't happy with the terms
I got from the bank. I just didn't want to pay
that. And it was a decent rate, actually. I can't
complain. But then there was also all the other
paperwork I had to go through. And I had recently
done some financial stuff that they were like,
whoa, what's that? Even though it wasn't really
that big of a deal. And so the underwriting for
these deals, you still want to make sure people
are going to pay you back. But the worst case
scenario is like you have to foreclose on them
and maybe they damage your home. It's not without
risk. But at the end of the day, you still own
your home if they default and you just get it
back and you have collected their down payment
and all the payments up until that point that
they default. So that's a powerful thing, too.
And yes, it's an inconvenience. And yes, it wouldn't
be fun to have to deal with that and pay the
extra legal fees and stuff. But at the end of
the day. you would be able to regain possession
of your property and then sell it again. So I
see this being incredibly advantageous for people
who are looking to retire and don't necessarily
need that windfall all at once. They might need
a down payment's worth of windfall to get them
going to the next stage, but then after that,
they're going to get that consistent income.
Again, hope you enjoyed this. I'll see you in
the next episode.