Seller Financing Turned this Unflippable Blue Springs House into a Win

Seller Financing Should be a Tool In Your Tool Box
(and why investors should learn this strategy before everyone else catches on)

I’m seeing all the internet gurus talking about Seller Financing like it’s the “hot new thing.” Truth is… seller financing has been around as long as people have been selling things.

What is new is how many investors are finally realizing they need this tool in their real estate toolbox. (Frankly, Realtors should learn it too — it this knowledge can make them even more valuable for their buyers and sellers.)

And that’s exactly why I reached out to the team at NoteSchool, the nation’s leading educator on creating, buying, rehabbing, and selling notes. I asked them to join us at MAREI and teach our members how seller financing actually works — the right way — not the half-baked version floating around on social media.

But before we get to January’s meeting and workshop, let me show you a real deal from my own files — a Blue Springs fix and flip . . . that would not flip.

The Blue Springs Fix-and-Flip That Wouldn’t Flip

We bought this house the same way we’ve bought tons of others: marketing online, direct mail, even signs on our cars. A seller called, we walked the property, and it looked like any other solid rehab we’d done in that neighborhood.

Except for one thing… No recent comps.

The subdivision was small, with very few sales. We pulled older comps and matched them to nearby areas, which seemed reasonable at the time — but hindsight showed us it wasn’t.

Our numbers:

ARV (estimated): $179,000
Rehab: $25,000
MAO formula: (70% × $179,000) – $25,000 = $100,300
We bought it for: $94,000

We partnered with our son — he had some cash saved up and wanted to learn how to rehab a house, list it as the realtor and sell it. His cash purchased the house, our cash did the rehab. We got the work done, listed it, marketed it hard…

And crickets. No showings. No offers. All-in, with holding costs, we were sitting around $135,000.

The NoteSchool Tools That Saved the Deal

A few months before this, Eddie Speed had spoken at MAREI. His class was packed. People were hungry for deals after the Great Recession, and Eddie showed us a completely different way to approach real estate: buy the defaulted paper, not the property.

We’d attended his bootcamp, joined the mentoring program, and suddenly had a whole new toolbox of strategies — including how to properly created, structure, document, and service a seller-financed note.

Ok, so we alreaady new about Seller Financing. We’d even done a couple of deals, but man we had done so many things WRONG and there were so many new legal rules.

Getting this Blue Springs House Sold came down to adding four magic words to our listing:

“Seller financing considered for the right buyer.”

We got showings and questions about what we considered the right buyer. We told them we were looking for two things:

✔ A substantial down payment

✔ A good borrower

We were not looking for just anyone, we wanted someone with skin in the game and a good story as to why they could not get a bank loan.

The Buyer With the Good Story

He came directly to us — no agent.

He told us upfront:

He made great money as a roofing contractor doing insurance claims.
His wife had passed away after a long fight with cancer.
While caring for her, he hadn’t always worked — or paid bills.
His credit was trashed.
And to top it off, his credit report listed him as deceased.

Try getting a bank loan when you’re “dead.”

But he had $20,000 to put down, and he wanted a fresh start.

We ran his credit. Yes, it was bad, but we could see the story clearly: old medical debt, life insurance paying things off, and a new truck with a perfect payment history.

Still, we weren’t comfortable… yet.

So we asked for bank statements. He showed strong incoming revenue and low expenses.

He was exactly what NoteSchool told us to look for, a person with a GOOD Story.

We took the next step.

The Seller-Financed Deal We Created

Because of Dodd-Frank and new lending rules that came out of the Great Recession, we hired an RMLO — a Residential Mortgage Loan Originator — to handle underwriting and documentation. The buyer paid for it – that’s the difference between the $20,000 he had and the $16,500 he put as down payment:

Sale Price: $165,000

Down Payment: $16,500
Financed Amount: $148,500
Interest Rate: 8%
Term: 240 months (20 years)
Monthly Payment: $1,242.11

We used a professional servicing company so the borrower paid them, not us. They handled:

payment collection
taxes & Insurance excrow
annual statements
credit reporting (not all do this)

What We Could Have Earned (If We’d Held the Note 20 Years)

All-in cost: $138,000
Down payment received: $16,500
Total payments over 20 years: $298,106.40
Net profit: $176,606.40
No repairs, taxes, insurance, or vacancies
Only the interest portion would have been taxable

But that’s not what happened.

We Sold the Note Instead to a Private Investor

After about 21 months of perfect payments, our partner wanted his cash back for so he could do another flip

Enter our Private Investor: Grandpa.

Grandpa had always been our private lender on rehab deals, but buying a note and collecting payments from a stranger made him nervous. He didn’t fully understand notes yet.

But after seeing:

21 months of perfect payments
$20,000 of improvements the buyer made immediately
and discovering the borrower owned several free-and-clear rentals (we’d not known this at first, we found them marketing other areas to buy houses)

he warmed up to it.

We sold him:

219 remaining payments
Principal balance: $142,897
Interest rate: 8%
Monthly payment: $1,242.11

But Grandpa was no fool. He wanted better than 8%. He wanted a discount, so he bought this for $135,420.17.

We did a little math and from the $138,000 we initially invested, less the down payment received, payments received, and what Grandpa paid us, we’d profited $40,000 or a 15.3% annualized return.

Not bad for a house we could not sell.

What Grandpa Actually Earned

Had the borrower made all remaining payments:

Total collected: $271,020
Nearly doubled his money
Annualized return: ~9.1%

But real life stepped in.

The borrower remarried, upgraded the home, and sold it — paying Grandpa off early.

What Grandpa Actually Earned

Grandpa held the note from July 2, 2014 to December 16, 2016.

In that time:

28 payments collected: $34,778
Final payoff received: $133,598
Total received: $168,376

Compared to his investment of $135,420, Grandpa earned:

Total profit: $32,956
Simple ROI: 24.3%
Annualized return (IRR): ~11%

All without ever owning the property.

The Bottom Line

We had a flip house that we were not going to get our asking price, we’d already reduced it by $14,000 and we didn’t know how much lower we were going to have to go.

But by seller financing the buyer, we stopped the holding costs and got $16,500 of our money back and started earning about $1,250 in monthly payments. This is probably a bit more than we could have rented it for and we only had to pay taxes in the interest portion, plus we had no taxes, no insurance, no repairs and none of the other rental head aches.

When we figured out how we could sell that note, we got $135,410.17, bringing us to a total profit in about 21 months of $40,000.

And then Grandpa stepped in and earned another almost $33,000 in the next 28 months.

This is the quiet power of being the bank — when you know how to structure it correctly.

Join us in January

We are super excited to have real estate investor, attorney and NoteSchool instructor Jeff Watson join us. He has decades in the Note Business in his own deals and as a student and instructor at NoteSchool..

January 13 — MAREI Meeting: “The Power of Private Mortgage Notes: Why Notes Beat Rentals Right Now”
January 17 — Workshop: “What You Need to Know Before Your First Note Deal”

These strategies have been around forever — but the investors who learn them now will be the ones positioned to win in 2026 and beyond.

Visit the MAREI Calendar to get all the details and register to attend. Note School also has a 2 day training coming up at the end of January that is virtual and there will be an in person event in the Dallas Fort Worth area this spring. We have a massive discount for our members. So check it out.