A real-estate investor who started buying properties with $0 down shares a little-known financing strategy that he's grown into a multi-million dollar portfolio

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A real-estate investor who started buying properties with $0 down shares a little-known financing strategy that he's grown into a multi-million dollar portfolio
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  • Gabriel Hamel, founder and CEO of Hamel Investments, started buying up real-estate investment properties using an unconventional method of financing.
  • He says that this methodology can create a "win-win" scenario for both buyer and seller.
  • Hamel focuses on cash flow first and foremost, and says that a deal should be cash flow positive from the get-go.
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Gabriel Hamel, founder and CEO of Hamel Investments, got his start in real-estate investing through a creative and niche strategy.

"For me it was really out of necessity that I started buying properties with seller financing," he said on the Millennial Investing podcast. "I've done it from the beginning and I'll continue to do it."

He continued: "I enjoy that flexibility of financing that you just don't get at a bank."

For the uninitiated, seller financing is exactly what it sounds like. Instead of a bank facilitating the mortgage process, the buyer (borrower) signs a mortgage with the seller (lender). Since a conventional financial institution isn't involved in the transaction, the seller and buyer negotiate the terms - length of time, interest rate, down payment, default circumstances, etc - of the sale themselves.

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Generally, these transactions are short-term and involve a "balloon payment" - a repayment of the owed principal - after the first few years.

When Hamel first got interested in real-estate investing, he didn't have the cash necessary to foster a down payment.

However, he quickly realized that there was another alternative. If he couldn't give the seller a hefty initial cash outlay, he could try and structure the deal with a higher purchase price or interest rate using seller financing. In doing so, he'd still be able to purchase the property without having to put himself in an undue financial situation.

Today, Hamel has parlayed that strategy into a multi-million dollar real-estate portfolio.

"If you can structure a deal where it still works for you, but not bring in a bunch of money to the table - and they're happy with that - it still creates that win-win scenario," he said. "A lot of times the sellers are more interested in that monthly payment, or the purchase price, or the interest than they are the down payment."

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Hamel says that advantages of this methodology for the seller include:

  • A source of passive income
  • Tax advantages
  • The loan being collateralized by an asset they're already familiar with
  • The potential of receiving a premium interest rate and higher purchase price

And for the buyer ...

  • Flexibility in terms of down payment, interest rate, and term
  • Less paperwork, closing costs, and time spent closing
  • Advantageous for those who can't acquire traditional financing

Needless to say, there are also risks that come hand-in-hand with this type of strategy. Buyers will almost certainly be subject to a higher interest rate and a hefty balloon payment, while sellers are subject to defaults and costs incurred from foreclosure fees.

"With seller financing, there's a lot more options to be creative as far as the down payment, the interest rate, the term of the loan," he said. "It's really as creative as you and the seller can get and it really creates this true win-win scenario for both them and yourself."

Hamel practices what he preaches - and he's not fazed by the late-cycle talk that's been swirling around the real-estate ethos. He says "you can be successful in real-estate in any market."

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Last year, he closed on a commercial property with seven separate residences, and is slated to close on a 30-unit mobile home park in the near-future leveraging seller financing.

"For me, I always focused on cash flow first," he said. "I would buy in areas of town that I believe would have growth, but I made sure that the numbers fit and that the property cash-flowed from the get-go."

He added: "That was really kind of out of necessity, how I had to build my portfolio. If the property wasn't cash flow positive from the day I bought it, it wasn't going to work for me."

"People will tell you 'you can't do seller financing anymore; seller financing is dead,'" he concluded. "It's not that hard."

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