Real Estate Investor · Woodbury, MN · Member since 2008 · 133 posts · 43 votes
Hi everyone.
I was just wondering what people think about price vs terms. Basically I'm wondering, would you be willing to purchase at full market value if you could get the right terms accepted on seller financing. It seems to me that if you have no intention of selling or pulling cash out it shouldn't make any difference to the investor since the monthly payments would be the same, but the seller may be more willing to give a lower interest rate than a lower price.
In other words, to the seller it sounds better to sell for 108,219 at 2% than to sell for 60,123 at 7%
But to the investor, either way its a 400 payment and we can have 100 cash flow with 1000 rent.
Just curious on others opinions.
Lance
In other words, to the seller it sounds better to sell for 108,219 at 2% than to sell for 60,123 at 7%
But to the investor, either way its a 400 payment and we can have 100 cash flow with 1000 rent.
These deals are definitely not the same. In the first case, if you're buying the house at retail, then you have no equity. In the second case, you have an instant $48K+ in equity. You can sell the second deal anytime and probably make a profit. You may have a very difficult problem selling the first deal, without taking a loss . With any dip in the market, you're upside down on the first house.
While you may intend to keep a property forever, things can and do change. If you buy at a discount, you have options. If you pay retail, you may not.
Couple other things to consider. Less tax benefit and quicker principal reduction at 2%. Over time, if you REALLY did buy and hold, the benefits would even out, but as stated above, fewer options if you want to get out.