Seller Financing Real Estate

Mike Hambright (00:01.122)
Hey everybody, welcome back to the show. Exciting topic today. I love this model. We’re meeting with Dan Diaz and we’re going to be talking about his owner financing model or a portion of we don’t have time to cover it all today. But at the end of the day, as a real estate investor, I think we all get into this wanting to be the bank wanting to generate passive income. But then most of us get stuck in the hustle of the day to day finding deals and making today money that’s going to come and go. You make money one time and it’s gone.

The owner finance model and rentals and things like that that pay you over and over again are beautiful. The problem with rentals is they’re nowhere close to passive. So you might have some mailbox money coming in every month, but there’s also some drama coming in every month of make-readies and dealing with tenants and toilets and foundation issues and all of the stuff that we deal with as owners. But really excited to spend some time with Dan today. So Dan, welcome to the show.

Dansito Gansito (00:52.585)
I appreciate it to be here. Thank you, honored to be here. I’m excited to share and learn and get the show on the road.

Mike Hambright (00:59.522)
Yeah, man, let’s do it. So the beauty of owner financing and you can share some stats. Well, before we get into that, tell us your background, like how you got into this space and then maybe even share. We didn’t talk about this too much upfront, but if you kind of pivoted to find your model, there’s a lot of us that have been around for a while and kind of where you started in real estate isn’t where you’re at now. Right. So I’m guessing you’ve got some of that going on too.

Dansito Gansito (01:24.023)
Yeah, so I think I got started in real estate, ironically, maybe 15, 18 years ago when I Airbnb’d my first home. Little tidbit story, I am one of the founding members of the San Antonio Market. Airbnb sent me a little pin, because apparently I was one of first 100 hosts. That was relatively short-lived, because it was only one house that I needed to Airbnb, and we moved on. As things kind of trickled, I went into mobile.

home, a manufactured home sales. became the sales manager and eventually a general manager for Palm Harbor Homes in one of their stores in San Antonio. And when I did that, I learned a ton about how Warren Buffett made most of his fortune. A lot of people are not aware, but Warren Buffett, a bulk of his fortune is made on the backs of the mobile manufactured home industry. He owns Clayton Home Communities, which is the number two builder in the country. He owns 21st Mortgage, which is the number one.

mortgage company for mobile homes in the industry and he owns some communities and guest communities which together own about 70 % of their land where most mobile home quality parks are sitting at. So he goes all the way from the factory to the sales to the finance to the land and he holds the land.

Mike Hambright (02:35.921)
wow.

Dansito Gansito (02:44.733)
And as I studied that, really fell in love with that model. Now, as general manager, we did a lot of in-house financing before we passed it on to 21st mortgage. And I learned the power of a finance and the power of residual income through notes, because that’s what the dealerships basically did. And when I went down the rabbit hole of, so let me tell you what I didn’t like about being a general manager. I did not have a nine to five. I had a five to nine.

Literally, I had to be there at 5 6 o’clock in the morning and I couldn’t leave till 8 or 9 o’clock at night And I hated that to me the turning point is where I had my first vacation I was in cantoon and my regional manager calls me and he says hey we have a meeting tomorrow Are you gonna be there? I said no, I’m in cantoon and he says I know I expect you to be there tomorrow and There was a light bulb moment, but I said now I’m sorry. I’m not your bitch. This is not gonna happen now full disclosure

Mike Hambright (03:13.186)
Yeah.

Mike Hambright (03:17.486)
Yeah.

Mike Hambright (03:39.438)
You

Dansito Gansito (03:42.315)
I did go, I got on the first plane. But mentally that was my exit strategy. And moving forward, I went down the U2 University rabbit hole. I discovered owner financing. I say it was a little bit of kismet because as I learned about it, I also learned that the first home my parents purchased in this country, I was born in Mexico, my parents are Hispanic immigrants. It was owner financing. It was dueno a dueno.

Mike Hambright (03:44.469)
wow.

Yeah.

Dansito Gansito (04:09.891)
So I really felt that that was the direction I should take. I quit Palm Harbor Homes. My first deal was a mobile home in Elmendorf, Texas on 10 acres, which I learned a ton not to do. is nobody anybody should be looking for mobile homes on 10 acres in Elmendorf, Texas, but I did. I found it. It took me nine years, nine months to materialize. And it generated me $80,000 in upfront profit and a $400 monthly spread, which has been paying up until this day, 10 years later.

Mike Hambright (04:38.894)
Yeah, awesome.

Dansito Gansito (04:38.989)
So I really fell in love with the model of owner financing. And I started like most owner financiers might, the asset first, go look for houses, fix them up, clean them up, look for a buyer. In my case, I can’t swing a hammer to save my life, Mike. So it was not the fixing up. I would just do the cleaning up. I tell people I would mow the grass, trim the trees, take the dead cats out, bomb it with fabuloso or pine saw if you’re white, whatever.

Mike Hambright (05:06.83)
I’m white, but we still use fabuloso just because it’s everywhere. mean, we’re both in Texas, so it’s everywhere. Even white guys can use fabuloso.

Dansito Gansito (05:07.251)
and make it smell pretty. There’s a power in the smell of fabuloso. Yeah. So anyways, look for the buyer. That model works, but it has limitations that I did not like. The limitations that I did not like is that I don’t hear how beautiful your home looks. It is not their dream home.

It is not on the right side of the neighborhoods they’re looking for. Maybe they’re looking for new or maybe they’re looking for break. Maybe they’re looking for a different zip code. So it was hard to get highly emotionally committed buyers. It was hard to get 10 % down. I mean, I’m just speaking and I probably did 30, 40 deals that way. And I had dilapidated assets because remember I didn’t fix them up. I had dilapidated and non-committed buyers.

And I was still chasing the payments on a monthly basis. So it was a model that I didn’t like. But that took me to the model that we currently do, which is starting with the buyer first. We make a determination of the real world ability to repay. Maybe it’s two, three, four, five, six hundred thousand. We’ve done up to two million dollar homes in Texas. As long as it’s a site built single family owner occupied home, we let them pick it off the MLS, we’ll buy it for them. And then we turn around and owner finance it to them. Obviously in terms that they already agreed to in a happy way.

And this model eliminated all the problems of dilapidated assets and non-committed borrowers and buyers. These are very emotionally committed buyers now. So that’s kind of a nutshell where I’m at now.

Mike Hambright (06:42.496)
Yeah. Yeah, yeah. your primary model, just to be clear, is…

you have people finding a deal and but they can’t get traditional financing. So then they come to you and you help finance it. So they can literally just go shopping on the MLS in theory and you’ll you’ll owner finance their house at yeah any house. Yeah. So but the contingencies are they got to have money to put down. They have to be qualified. And I think you told me upfront these are people with good credit scores. They just are a lot of entrepreneurs and folks that that on paper it looks like they’re not making a lot of money but they

Dansito Gansito (07:00.876)
Anyhow.

Dansito Gansito (07:06.563)
Thank

Mike Hambright (07:18.316)
they can easily pay a mortgage. Yeah. Yeah, yeah, yeah.

Dansito Gansito (07:19.587)
Because they’re smart, they know how to reduce their taxes down to zero. And unfortunately, they get kicked in the shin when they go get a mortgage because the most mortgages require them to have profits. they realize, I’ve got two options. Option number one, I can bribe Uncle Sam for two years in a row to qualify for a traditional mortgage, AKA pay a bunch of taxes. Or B, I can put that money into my house today.

Mike Hambright (07:28.866)
Right.

Mike Hambright (07:40.909)
Right.

Dansito Gansito (07:48.855)
go with Dan, owner finance any home off the MLS, shut my wife up, give her what she wants, and then I can go back to work. So usually most end up doing the second.

Mike Hambright (07:55.466)
Hahaha

Yeah. Yeah, yeah, that’s cool. So today we’re primarily talking about just kind of general owner financing, right? And so I’ve

I’ve done the same as you. have a rental portfolio and kind of got into owner financing just because I had some, never wanted to sell any rentals. In fact, I wish I’d kept hundreds more, but I never wanted to sell them. But anytime I have like a problem rental, was like, you know what? I’m tired. Like, I don’t know what happens. There’s just a certain house in a certain neighborhood. And I’m like, we keep turning this over. We keep having problems. Like there’s just, you know, something that I can’t see, but I know it’s real. Like there’s a problem with this house, you know? And I was like, let’s just owner

finance them off and get rid of all the churn and the turnovers and all that stuff, all the maintenance costs and owner finance them and they’re perfect, like almost perfect. I mean, there’s drama, we have missed payments and people catch up after two or three months or whatever and we actively manage them. at this point I’ve had, I have never had to foreclose on somebody I almost did last year. But.

Dansito Gansito (08:59.435)
It’s awesome.

Mike Hambright (09:01.61)
And at this point, you know, most of these were done quite a while ago. So if I had to take them back, they would have a lot more equity than they do now. But my model also evolved from like, I would fix them up and kind of get them like rental ready and then owner finance them off to like, I’m not doing a damn thing. Like just take it as it is. And it’s just positioned as you’re getting a really good deal. And, a lot of truthfully, a lot of the types of folks that we would be selling to are

probably in trades and stuff anyway, or they wanna fix it up and make it their own. And I was happy to do that, which is kind of more the Mitch Steven model of Mitch down in San Antonio as well. And so I just kind of listened to some folks that were smarter than me and did that. But yeah, that’s great. let’s talk a little bit about acquisition. So folks that want to, I know you teach people like how to do this, do a few deals really fast. Are they, my model from day one has always been a

Dansito Gansito (09:33.272)
Yes.

Mike Hambright (09:54.69)
direct to seller marketing. And so when you teach folks how to do this, obviously there’s time and money involved in that. In this model though, I guess one of the beauties about owner financing is you can make a lot more money over, certainly over time. So how do you teach folks to do acquisitions on owner finance deals?

Dansito Gansito (10:13.421)
Yeah, that’s a great question, Mike. So I think a lost opportunity for a lot of investors is they want to get into the world of notes because they understand it’s a level up from Brentels. It really is about as passive income as it can be. It has its drawbacks, mostly taxes. But from the residual income perspective, it’s awesome. However, a really big missed opportunity is how to buy the house. They can find the house, the deals.

Mike Hambright (10:29.89)
Yeah.

Dansito Gansito (10:41.219)
But then they either need hard money or private money and it’s very limited on the scalability of things. So one of the things I love teaching people is the power of negotiating the acquisition, the purchase with seller financing. If you learn how to negotiate seller financing, it is an amazing revolutionary approach to the model because one of the things I tell my students all the time is when you’re negotiating on cash,

The negotiation ends at the closing table. Once the ink is dry, there is nothing you can negotiate after that. You can’t get a taco out of them. But if you’re negotiating Southern financing, the negotiation begins at the closing table. And it can continue for 10, 15, 20, 30 years, depending on how long you did it. So you have the ability to pay more money. You have the ability to protect.

Mike Hambright (11:18.605)
Right.

Dansito Gansito (11:38.751)
the capital that they’re getting and you have the ability to give the seller regular monthly income for the next 10, 15, 20 years depending on how you structure it. There’s a lottery effect, Mike, that a lot of sellers might not know it’s there but they recognize it’s there. When they get the money, statistically all lottery winnings, regardless of the amount, whether it’s a million or 50 million, will be gone in three to five years.

Mike Hambright (11:47.31)
Yeah. Yeah, yeah.

Dansito Gansito (12:05.539)
people do not know how to manage chunks of money. So sometimes the sale of a house and getting a lump sum of money, 100, 200, 300, $400,000, that is an actual burden that you’re giving the seller and now they have to deal with that chunk of money. But by giving them regular monthly income for the next 10, 15 years, they’re gonna be getting bills for the next 10, 15, 20 years. So why don’t we help improve their lives by getting them regular monthly income as well?

Mike Hambright (12:08.343)
Right.

Mike Hambright (12:21.954)
Yeah.

Dansito Gansito (12:32.77)
So I’m a big believer. I don’t care. And this is no disrespect to any of the wholesalers. You are not an investor until you get your name on deeds. And the quickest, most powerfully effective way to do it is through learning acquisition through seller financing.

Mike Hambright (12:49.132)
Yeah, so in your model, because not every seller, not every house is free and clear where they could do that. Of course, you could do a sub to and.

Dansito Gansito (12:55.361)
Right.

Mike Hambright (12:56.802)
You could do a sub two and a owner wrap, you know, all those things. But are you targeting people with just paid off houses to try to find people to fit in this model? Or is it just like, you know, the way that I’ve always done it is I cast a really wide net. Some of my fix and flips, some of my wholesale, some of my keep as rentals, some of my owner finance, kind of depending on the case. So if you’re highly targeting just people that might want owner finance and go this model, are you targeting people with paid off houses?

Dansito Gansito (13:22.861)
Great question. So paid off obviously gives you the greatest opportunity. But what I tell investors is learn the model of purchasing with Seller Financing and still cast that net. Many will still be okay with cash. Many will still be okay with a hard money situation. Many will still be okay with a quick close. Many will fall off into the fix and flip model. Some will fall into the rental model.

But be aware that there is an opportunity that you might be missing if you’re not fully versed in it. The beautiful thing, Mike, about it is that while free and clear does work best, one, it’s not required, and two, it doesn’t limit you to houses. Land acquisition through seller financing, in my experience, is one of the most profitable opportunities. There’s very little investors going after land.

Most land needs to be sold with some sort of silver financing component because it’s nearly impossible to finance dirt. Dirt’s worth dirt until you put something on it. And the buyer side is an incredibly large pool. So you’re no longer limited to houses. You can do land, can do lots, you can do small apartment complexes. Many of them are paid off. And when I say small, I mean under 16. You know, the mom and pop kind of situations. You can do…

Mom and Pop mobile home parts, Mom and Pop large parcels, acreages, small, I mean, the asset class is really opened up. And it doesn’t have to be free and clear. Obviously, that’s the most advantageous, but I teach my students five different structures that allow them to attack about 98 % of the situations that are out there. So if you’re casting a wide net, which you should, that’s the best way to do it.

Mike Hambright (14:55.47)
Hmm.

Mike Hambright (15:10.614)
Okay. Yeah.

Dansito Gansito(15:13.799)
Once the fish come, it’s like, what are we going to do then? And if you don’t know seller financing, you could be missing a massive opportunity.

Mike Hambright (15:17.347)
Yeah.

Mike Hambright (15:21.07)
Yeah. And I guess one of those, we probably don’t have time to get into all of them, but one of those is also raise private money to be your underlying financing, which you obviously mark it up and make a spread, which I know you do that now. That’s probably the other more common one,

Dansito Gansito (15:26.979)
Good.

Dansito Gansito (15:35.201)
Yeah, yeah. So that is the disposition side. How are you going to be doing it? You obviously need to get involved and understand what raising private capital is, but that’s the beautiful part about seller financing in the truest form. The private money is coming from the seller, and it’s just a way of presenting it and proposing it and negotiating it. But see, this is the thing. For example, let’s talk about a typical situation. They want a large down payment.

Mike Hambright (15:39.267)
Yeah.

Mike Hambright (15:57.112)
Yeah.

Dansito Gansito (16:05.117)
Most sellers large down payment 30, 40, maybe 50 percent. Hypothetically, that’s pretty large. Well, I have a story that I love teaching my students and it has to do with how my money works. listen, Mr. Seller, you probably don’t know this, but this is how my money works. My cash in the bank gives me a five to one bang for my buck. Five to one. So if I’m going to take cash out of the bank and give it to you, at least I need a two to one bang for my buck. I get it. You’re not going to give me five to one.

But at least I need 2 to 1. Now, if that’s the case, then for every 10, 15, 20 thousand dollars I give you, I’m going to need double in equity. Because you need to give me double bang for my buck. And it’s only fair because over here, when I take away 10 thousand dollars, it’s going to reduce my line of credit by 50 thousand. It’s a 5 to 1 bang for my buck. Positive or negative?

Mike Hambright (16:48.504)
Hmm.

Dansito Gansito (16:59.661)
So this is a really great strategy to say, every dollar that you’re gonna ask for, it’s gonna cost you a lot of money and equity. So how much money do you really need? Now, if they’re stuck on that 20, 30, 40, 50 % down payment, you can tell them, hey, option number two, I can go borrow that money. Now, when I borrow that money, there’s no hit on my line and put it at the bank. It’s a one-to-one situation. However, I need to make you aware that whoever brings that money is gonna want a first-meaning position on the house. So as long as you’re okay,

getting a second position for the terms, can get you the 30, 40, 50 thousand dollar down payment. Now Mike, how hard is it going to be for you to find someone, hard money or private, to lend you on a 30, 40, 50 percent LTV position? Not very hard. All of a sudden raising money becomes very easy when you’re dealing with 30, 40, 50 LTV positions.

Mike Hambright (17:33.024)
Yeah, yeah.

Mike Hambright (17:42.646)
Right. If you’re good at raising money, it’s not that hard. Yeah. Yeah.

Mike Hambright (17:50.892)
Yeah. Yeah. And I have had not as many as you for sure. There were definitely over the years houses that we bought that they owner financed to us. And I just kept them as rentals. Like I didn’t owner finance them off. But

Dansito Gansito (18:00.963)
Yeah.

Mike Hambright (18:05.166)
the in all those situations, it was usually somebody that had first off. It was the perfect rental for me. They were stuck on a price that I couldn’t get to and I usually positioned it as if they wanted like I’ll give you one example of a house that’s not too far from my office here that we I think we just were just about to make the final payoff. It was like a 10 year 10 or 15 year note. I can’t remember is

They had already bought their next house. So I knew they didn’t need the money for the house. They had just retired and they wanted like 80 and we are, I think they wanted 80. I think they wanted 75 and we were stuck. couldn’t go higher than 50.

And then I was like, well, what if I could pay you 82.5 or something like that? And they’re like, that’s more than we want for it. Like, what are you talking about here? What kind of magic is this? Well, it’s the magic of interest. So I basically just said, hey, I’ll pay you, I think I offered 5 % interest. And basically that was principal and interest over the course of 15 years. And, you know, they were cool with that because they’re like, I’ll get this payment like clockwork every day. And ultimately it’s more than we even wanted for the house. I I understand time value of money.

They, I didn’t hide anything from them. You know, obviously I wasn’t trying to take advantage of them, but they didn’t understand opportunity cost as much as I did, I guess. And they were totally cool with, yeah, yeah. Cause I did say that, what are you going to do with them? He’s like, Oh, I was just going to sit in my bank account. And I was like, okay. All right. And, they loved it, you know, so, but you know, sometimes like you said, people just like to get that payment every single month. And

Dansito Gansito (19:23.491)
And they probably didn’t have an opportunity other than to do it in the night.

Mike Hambright (19:40.206)
appreciate that. And honestly, without getting into a whole bunch of details, as you and I both know, there’s a bunch of tax benefits for them to do an installment sale versus a one time sale as well. And so you can always kind of go that path.

Dansito Gansito (19:52.205)
Yeah, there’s, again, this is not a situation where I want or even think it’s advantageous for you to say, I’m only gonna go after this fish as a target. But rather, like you said, Mike, you gotta cast your wide net, let’s see the fishes that come in, and just have this in your back pocket to be able to read through them and identify an opportunity when the opportunity presents itself.

Mike Hambright (20:04.366)
Right.

Mike Hambright (20:19.278)
Yeah, yeah. What are a couple of, what makes a good seller finance opportunity? Because not every house is a fit. So what makes a good, and not every, I guess, property, what makes a good opportunity?

Dansito Gansito (20:33.025)
The number one is that it’s free and clear or that it has less than 50 % debt. That’s probably the biggest thing. Regarding what the situation of the seller is, in my experience, if they’re not desperate to sell, if they’re not in a hard financial situation, if they’re cognizant and reasonable and, I to say the word intelligent, they actually make a better fit. Yeah.

Mike Hambright (20:59.608)
They’re financially savvy a little bit, so they kind of get it. Yeah.

Dansito Gansito (21:02.467)
Yeah, yeah, yeah, that actually helps because they probably have heard of this. They might have friends in their circle who have done something similar. Selling with seller financing is actually very advantageous to a lot of people, but most people are not aware of it, so they’re fear-driven. So ironically, finding like the 60, 70, 80-year-old seller is a great, great, is a great, you know, avatar for it.

Mike Hambright (21:18.977)
Right.

Dansito Gansito (21:30.655)
One of the big things that they’ll say is, I’m not going to live for the next 20, 30 years. And that’s okay. But my question is, are you going to leave any of your money 20 years? And that flips their switch real quick because I tell them, if you get the $200,000 or whatever, how long is it going to take Johnny and Sue to blow the money on boats and helicopters? Let’s be honest. You know your grandkids. And they’re like, yeah, I, I, yeah, I don’t, you know, I don’t, yeah, it’s going to be real quick. But I told them I would do this.

Mike Hambright (21:38.605)
Right.

Mike Hambright (21:50.508)
Yeah, boats and hoes. Yeah.

Dansito Gansito (21:59.585)
Well, how about if you leave a legacy to them where they’re going to get monthly income for the next 20 or 30 years so that they remember you every single month and you get to pay their car bill, their cell phone bill, something to actually improve their lives beyond your passing. Does that sound like something that would make a little bit more sense? Preserve your legacy versus money that we’ve been above. And they flipped the switch real quick at that point. it’s, so regarding the asset,

Mike Hambright (22:20.524)
Yeah, yeah.

Mike Hambright (22:25.315)
Yeah.

Dansito Gansito (22:28.835)
Free and clear up to 50 % debt works really well. And the seller avatar 50 plus all the way up to 80. And then being a certain amount of savviness actually works really well.

Mike Hambright (22:44.6)
Yeah. Yeah, I think that’s one other kind of avatar out there, which you would probably agree with is somebody that owns a rental property right now. It’s not their primary residence. They like the idea of the investment, but they’re tired of dealing with tenants, right? And you’re like, well, you could sell it to me and you could be the bank and, you know, and we kind of, you know, we’re doing this together. We’re a partner in this and you’re passive, right?

Dansito Gansito (23:07.585)
Yeah, that’s a great avatar. And I think that falls also under the certain savviness because again, the average person, they don’t own rentals, even if it’s only one or two, but it’s the entry level savvy seller that works really well. And the negotiation that I love doing with them is I’ll take virtually any price that’s reasonable, but the home is worth what you want. And what I’ll do is I will structure it so that you get nearly the same identical cash flow.

And that one’s a little bit different because let’s say the cash flow is $800 a month. Well, what I do is I say, okay, $100,000 payment or $100,000 price, let’s divide it by the monthly cash flow that you’re going to be getting. So it looks like the math turns out that you’ll be getting that for the next 17 years or 19 years or 18 years. So basically I’m upgrading you from a landlord to a lean lord. You understand the value and you like the monthly income. You’re just tired of the tenants, toilets, trash, termites, and turnover.

Mike Hambright (23:52.526)
Mm-hmm.

Mike Hambright (23:59.608)
Yeah.

Mike Hambright (24:04.396)
Yeah. Yeah, yeah. Yeah, that’s interesting. Awesome. Well, Dan, good stuff here. Thanks for sharing some of your insights. We could probably talk for hours on this. That’s that’s one of problems with the podcast is like some of these things I could do all day long, we just record it. But I don’t think anybody has the patience to listen to us talk for six hours. So I love it, honestly. But if folks want to learn more about what you’re doing, I know you teach people to do this, you practice this, like where can they go to learn more or connect with you?

Dansito Gansito (24:04.503)
So let me handle that. And I like that one a lot.

Dansito Gansito (24:13.655)
Probably.

Dansito Gansito (24:30.647)
Couple different ways, schoolofsharks.com is one of our educational websites. You can get hold of me there. On social media, DancitoGanzito, which is an old college nickname, is a great way to locate me. And if you want to shoot me an email, dan.deez.ofmenow.com is a great website, as well as the ownerfinancefoundation.org. So look me up on social media. That’s probably the easiest, quickest way to find me.

Mike Hambright (24:58.06)
Yeah, awesome, awesome. Well, thanks again for sharing some time with us today. Yeah. Yeah, absolutely. And guys, hope you got some good value from today. We just covered this stuff at a really high level. But if you’re not owner financing deals, if you’re not positioning yourself to generate kind of passive income, which is probably why you got into this in the first place, to have a piece of that, you definitely need to learn more about the owner finance model and learn more about what Dan’s doing as well. So appreciate you guys a ton. Hope you got some good value today. We’ll see you on the next show. Take care.

Dansito Gansito (25:00.909)
Thank you, Mike. I appreciate it and I look forward to next time.

Dansito Gansito (25:26.263)
Have a great one, take care.