Real Estate Investor · Cebu, Philippines · Member since 2008 · 297 posts · 5 votes
So found a little house for sale that is listed with a Realtor. The price is 39000 but I was told that a guy put an offer in of 20000 and it was excepted. The guy backed out (he was trying to resell the property with out the owner knowing about it).
If I get the home I may turn around and resell it on a contract or I may rent it out, I am not sure what one.
The owner will carry a contract and wants 5,000 down. I am thinking about offering 17,300 with 3,000 down. How long of a term should I ask for? If I went thirty years say at 6% the payment would only be 85.74 a month.. That is kind of silly..
Suggestions on what to offer as far as terms?
Investor · Statewide, MO · Member since 2011 · 819 posts · 427 votes
14y
17,300
3,000 down
14,300 financed.
I would offer him 300-500 per month until paid in full. (this would be at 0% interest). This has worked for me in the past.
You could also say it as "300-500 per month in principal payments until paid in full"
If he gets hung up on not making interest, you could tell him you'll match his bank's cd rate (.4 to 1.x%) or the stock market rate of -5%.
If the deal is right, paying interest isn't the worst thing.
Real Estate Investor · Cebu, Philippines · Member since 2008 · 297 posts · 5 votes
14y
Hi Ed
And thanks for the reply.
I am trying to keep my payment low so that when I resell it I will have a decent profit margin.. It would rent for 500.00 or it would sell with a 500 payment so I dont want to pay the same as the rents or payment.. If my payment was 200.00 I would be making 300 a month over my payment..
Investor · Statewide, MO · Member since 2011 · 819 posts · 427 votes
14y
Travis, sorry, I forgot to add that caveat.
Perhaps an inverse ratio of monthly payment to interest rate may be something to keep in mind.
I tend to be willing to accept a higher monthly payment and tell the seller that it shows I'm serious about getting them paid back in a reasonable amount of time.
It really depends on what the seller needs. Do they simply need to be rid of the property or do they need cash now? If you can figure this out, it will help you engineer a deal.
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
14y
$17,300 purchase / $3k down / 6.0% interest
If you amortize your offer over 120 months (10 years) your payment would be $159 per month. If that duration of time is too far out for your seller you may balloon the payment say at 60 months or 5 years.
Certainly an interest rate to your benefit is where you want to end up. At the above terms if you paid the loan over the 10 years with no prepayment you would have paid the $14,300 in principal and $4,751 in interest a little above $19,000 in total.
Real Estate Investor · Sacramento, CA · Member since 2011 · 13 posts · 1 vote
14y
What's in it for the seller? So he could rent it for $500 a month and keeps a $20k asset, or he could finance it to you and get $80-$150 a month and he looses a $20k asset? Am I missing something?