Seller Financing for Real Estate: How to Buy Properties Without Traditional Bank Loans

Adam Magniccari (00:00)
The only thing I would tell anybody is I don’t think anyone has the option of not investing in something anymore. I tell my own children, you don’t get paid for anything but the risks that you’re willing to take. You cannot get ahead without taking a risk. And I would highly recommend taking a risk of some kind. It doesn’t matter what you’re gonna invest in. Real estate is wonderful, it has its downsides.

You can invest in the stock market. Everything is a trade off. There’s no solutions. There’s only trade offs. But you have to take a risk. Otherwise there’s nothing to ever have as a reward if you’re not willing to take a risk.

Scott Bursey (02:09)
Welcome back to the Real Estate Pros podcast powered by Investor Fuel. I’m your host, Scott Bursey. And today we’re joined by Adam Magniccari, a resilient investor who has navigated the highs and the lows of real estate since buying his first property at age nineteen. Over the last decade, Adam has successfully transitioned into a diverse portfolio of commercial and residential rentals, mastering the art of market adaption. Listeners, you can expect an honest conversation today about overcoming early financial setbacks, the reality of long-term holding strategies, and how to scale effectively in today’s market.

Adam, welcome to the show.

Adam Magniccari (02:54)
How you doing, Scott?

Scott Bursey (02:56)
It’s great having you here. Thank you for joining us today. And to help our listeners get up to speed, please give us the ninety second highlight reel of how your career ignited and where you’re pouring your fuel now.

Adam Magniccari (03:10)
I started when I was nineteen. I bought my first house, a residential, Section Eight. That one didn’t work out so well, but I got out of it. I learned a lot, kept saving, saved a bunch of money, bought another property, that one worked out better, and I’ve basically been constantly looking on a day-to-day basis for anything that I could add to my real estate portfolio, rent out, reinvest, refinance, keep buying and we’re going on twenty-five years later and it’s not looking too bad.

Scott Bursey (03:47)
Thank you for sharing that journey. It’s a testament to your grit, Adam. And you know what really caught my attention about you is the way you’ve been able to pivot from that early experience of losing money to building a sustainable mixed asset portfolio over the last decade. Building on that, looking at your transition into commercial assets, what specific strength from your residential days do you think has been the biggest game changer for your commercial deals?

Adam Magniccari (05:03)
Well with residential real estate, you learn very quickly that I mean I’m in New York City, so depending on where you are across the country, some rules are more favorable than other states. But you learn very quickly that if you are willing to buy commercial property, there’s a lot more leverage that the landlord holds than the tenants. And you can also leverage commercial property a lot differently than you could leverage residential property when you actually need to go to the bank for your next deal. So basically you look at each deal. I can’t say that one is better than the other. It really just all comes down to the deal, the timing, and the situation. I mean there is a formula to it, but it never got any easier. You just have to, you just have to look out for certain deals and you keep risking and you know after a if you have a long enough time horizon, real estate I can honestly say is can’t miss. You don’t win them all, but after twenty years you do win most of them, especially in the la you know, especially in the last decade.

Scott Bursey (06:13)
Following up on that, do you find that residential experience that you have helps you negotiate better terms with your commercial tenants?

Adam Magniccari (06:23)
Absolutely. I think every deal that you do, you learn you learn something. I mean you absolutely learn something every single day. Once you thought you seen it all, you realize that something comes up that you haven’t learned and you haven’t seen. And like you said, you pivot accordingly. You definitely realize what blind spots you had from one deal to the next and you try to take it forward.

And not make the same mistake twice.

Scott Bursey (06:52)
Adam, interested to hear when you look at your portfolio’s growth over the last 10 years, what was the one weak link or challenge that you had to fix to keep scaling?

Adam Magniccari (07:06)
The structure of leases are a big deal, especially with commercial tenants. You have to make sure that the property taxes are covered, the rate the you know all the costs are going up every single year, whether it’s the insurance or the property taxes or the requirements or the inspections that you’re required to have on each individual property. And you really have to stay up to date with it.

You have to watch your numbers on a monthly basis and if it doesn’t make sense you have to be willing to pivot into the next property that does make sense because you cannot afford to lose money on a monthly basis, it gets away from you very quickly. So you always have to stay on top of it and you always have to you have to know your numbers. It’s the most important thing I would say.

Scott Bursey (07:53)
And wondering, with the market shifting as much as it has, where are you seeing the most exciting opportunity for someone with your specific experience right now?

Adam Magniccari (08:05)
I would say that the there’s always opportunities and as soon as something becomes let’s just say popular, you want to start to look for other options, even if it’s in the same space. Commercial real estate was a very big deal pre-COVID. After COVID, everyone started running from commercial real estate. So you had to either buy where you can get a deal because somebody was panicked or were worried. These days I think the commercial market, at least where I am, is pretty saturated. There’s a lot of old buildings with a lot of old landlords who will only let go of the property for a premium still, which is understandable. But you really want to try to find the deals that are structured in a way where you can either leverage the fact that the old owner wants out, you know, usually a family property.

A trailer park that was gifted or inherited by an owner that no longer wants it and they just want out of the deal and you have to be there and you have to be in the loop and you have to constantly be calling and making relationships with people. This way when they’re ready to sell they give you a a deal because they quote unquote know you or they’ll give you terms because they either don’t need the money now and they just want out.

And I mean there’s a million different deals you could talk about. It’s you just have to be constantly in it on a daily basis. You you’re not gonna you’re not gonna find a great deal week one, I can tell you that.

Scott Bursey (09:45)
Solid advice right there. Adam, with the volatility we’re seeing in lending and interest rates, what do you see as the biggest threat to your current rental model and how are you protecting against it?

Adam Magniccari (10:39)
I mean the biggest threat is definitely the ability to borrow the money from the banks. The rates are high. Everybody knows this. At least that’s the sentiment. I still think I’ve bought property where the rates were, less than three percent. Most of the properties that I’m in, the rates are between three and four percent. I bought them before the rates really jumped in the last couple of years. But when the rates are high people who are selling also know this and they drop their prices accordingly. And sometimes you’ll benefit from the high rates because everybody is running to just try to, sell their properties. They’re not really buying anything. They’re either renting, or finding some alternative to getting into a higher rate mortgage on the selling end. But the banks the underwriting has gotten harder every single year since I’ve been doing this. It was literally, year by year for the last twenty years the underwriting has gotten more strict. Everything after two thousand eight. I mean it used to be great. I at one point I had four mortgages going at the same time. Income wasn’t a problem. They didn’t look at the credit too much. And now, I mean they underwrite you, they basically, want you to have three times the amount of money in escrow just to make the payments, which is you know, I have my opinions about that, but it’s the underwriting is a problem. It’s always gonna be a problem. I try to recommend people who are getting into this for the first time to work out a agreement with the seller. We bought a property two years ago. It was a commercial building, it was a restaurant that woman inherited from her father after thirty years of the family owning it.

I asked them if they’d like to take back a mortgage. I think the rates at the time were about six and a half percent. And she didn’t need the money right away. And we gave her a premium on the cost of the property and we negotiated a rate to pay her back, same as you would pay a bank back over twenty years, and we didn’t have to go through a bank. We pay her just like we pay a bank.

But it’s a relationship with a human being as opposed to a huge institution. And dealing with a human being, you’re always gonna get common courtesies and, a real person to deal with, which I found is worth a whole lot more than an interest rate.

Scott Bursey (13:04)
Digging into your daily operations, what is one tactic you use to keep your residential portfolio running smoothly without getting buried in the day-to-day management?

Adam Magniccari (13:17)
I believe firmly in property management. I think they’re worth every penny. In my state, which is New York, it is the only state I would not recommend property management. New York, in my opinion, is one of the worst states in the country to do business in. But I have properties in Pennsylvania, in South Carolina. The property management is very, very reasonable. And it really cuts down on a lot of phone calls and headaches.

Scott Bursey (13:46)
Given your evolution from those first tough lessons at age nineteen to where you are today, if you had to rebuild your portfolio from scratch with just fifty thousand, let’s say, what is the very first move you’d make to start compounding wealth?

Adam Magniccari (14:04)
Fifty thousand dollars in today’s market.

If I had fifty thousand in today’s market, I would start with Section Eight housing in a state that is favorable. Ohio is I know I’m looking at a deal in Dayton, Ohio right now, specifically. There are a lot of states that the incentive structure for whatever reason, I won’t get into that, but the incentive structure is that they want people to own these houses.

These houses are very inexpensive. You can pick them up for less than a hundred thousand. If you type in a simple zip code for Ohio, there’s a lot a lot of property there that for whatever reason they want you to buy it, they want you to rent to Section Eight. And the numbers are some of the only numbers that actually make sense on paper to someone who is just being introduced to this. And I’m not saying it’s gonna make you wealthy by any means, but it’ll get you started and with fifty thousand dollars that’s pretty much your only choice without being over levered for years, which I wouldn’t recommend to anyone who’s just starting. This it it is a a different world if you were starting today.

Scott Bursey (15:21)
That is incredibly valuable. And Adam, you have given us a lot of valuable words of wisdom today. But is there any final thoughts or additional golden nugget or two that you could leave with our listeners?

Adam Magniccari (15:36)
The only thing I would tell anybody is I don’t think anyone has the option of not investing in something anymore. I tell my own children, you don’t get paid for anything but the risks that you’re willing to take. You cannot get ahead without taking a risk. And I would highly recommend taking a risk of some kind. It doesn’t matter what you’re gonna invest in. Real estate is wonderful, it has its downsides.

You can invest in the stock market. Everything is a trade off. There’s no solutions. There’s only trade offs. But you have to take a risk. Otherwise there’s nothing to ever have as a reward if you’re not willing to take a risk.

Scott Bursey (16:15)
Thank you for that, Adam. And for those of our listeners that want to keep this conversation moving, stay in your lane or collaborate with you on perhaps future deals, what is the best way for them to plug into your pipeline and reach you directly?

Adam Magniccari (16:29)
If they want to reach me directly, I have a Instagram account. The Instagram account is A Plumber’s Education. That is my day-to-day business operations. Real estate has always been something that’s on the side. So the Instagram is A Plumber’s Education. You could email me, you could put my email in the notes. You could text me if you like. You could have my phone number. Anyone who needs a hand, feel free to reach out.

I have no problem. In the end it’s a small community and like I said, I highly recommend it. I would stand by anything I said and I would help anyone if they reached out.

Scott Bursey (17:06)
Adam, thank you so much for joining us today.

Adam Magniccari (17:10)
No problem, Scott. Thank you.

Scott Bursey (17:13)
And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be filling your tanks with the lineup of elite guests, just like Adam, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.