The Pros and Cons of a Seller Financed Deal for Seller and Buyer

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During the past month or so, I’ve been thinking about selling my fourplex in Las Vegas. The real estate market has been cooling down a bit, and I’ve been wanting to work on strengthening my portfolio.

Owning a fourplex, depending on where you are, can be a blessing or a pain. In my market, I’ve seen the joys and the pains of owning a fourplex. I had a good year last year where I had a full vacancy most of the time and had achieved tremendous cash flow.

This year, on the other hand, has been rather challenging. And frankly, the neighborhood of my property has not been improving. Thus, I’ve decided it would be a good time for me to sell my fourplex. Unfortunately, with the market cooling down, I have to get fairly creative. So I decided to record my stats and detail how I want to sell it, and perhaps you’ll have other ideas for me — or perhaps you’ll get ideas for the property you’ve been wanting to unload.

Related: How Buying a Seller Financed House Is Like Buying a Stock Option

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The Fourplex

I bought this fourplex almost 3 years ago for $100,000 and put about $10,000 in rehabbing. Each unit is a 2/1, and I’ve been getting $550 a unit (with the exception of one unit where I give my handyman a $150 a month discount).

Just to average, I net about $1,200 a month now (it used to be better, but let’s just use current year figures), so my return is about 13% (at its height it was more like 17-20%). The returns aren’t too bad at all, but in all honesty, I prefer fewer headaches when it comes holding real estate longterm.

If I have to be super conservative, I’d say the property comps for about $180,000. So compared to market value, my return is actually at 8%. Although not many people like to calculate it this way, I’d like to think about what my equity can get me in today’s times.

After all, if my fourplex is worth $1,000,000 but it still brings me $1,200 a month, I’ve got better things to do with my money, right?

So with that in mind, I’d actually be sacrificing an 8% return on my equity if I were to sell the property. However, I also know that it is still very difficult to find a good property that can yield me 8% these days. So I’m not necessarily looking to get an all cash offer. Once I get the cash I’d have to put it to use, so after thinking more about it, I’m now thinking about selling it “owner will carry.”

The Seller Side of Seller Financing

If you have read some of my past articles or heard my podcast, you know I’m a big fan of seller financing.

While I have always been standing on the buying side, for once I am starting to consider the benefits of the selling side. In seller financing, you know you’d typically give up the chances for appreciation while you’d be ensured a steady stream of income without the headaches. Meanwhile, that stream of income is also coming from the fact that you’re lending the money and getting additional funds from payments on interest.

Related: Pricing Your Seller Financed Property

It is interesting to note that when you receive interest payments, you don’t have the same headaches of an owner. If something breaks down, you don’t have to fix it (on the other hand, you still have to make sure your property is still intact). You don’t have to deal with the expenses of property taxes, insurance, vacancy, maintenance and other costs associated with landlording.

You’re just getting a check in the mail every month. Plain and simple.

With that in mind, I’m looking to sell my property in which I’d finance 80% of the price at a 8% interest rate. When it comes to selling properties in which you finance, you typically get to charge a higher premium on the property. With that in mind, I’m looking to sell it closer to $200,000 than $180,000.

The Buyer’s Perspective

Would this make sense for a buyer to buy?

Well, for certain investors, yes. Some investors who can’t get financing would love to get ahold of a seller financed property. Or some investors would like to lock down the property and refinance it down the road. In their minds, they’d like to get the rights of the property in hopes of future appreciation — or just have tenants pay down the debt over time.

On the other hand, it may not be good for a beginning investor. Selling my property this way would mean that it wouldn’t necessary cash flow well.

If I were to sell the property with an 8% interest only payment and a 5-year balloon payment ($180,000*80% = $144,000, interest payment will be $144,000*.08 = $11,520, or $960 a month), the investor may still only cash flow slightly positive since they have to pay me $960 a month. If they can make the property perform higher than $1,200 a month net, then it may be worthwhile.

A newbie might not be able to get it performed or may not have enough cash reserves to deal with vacancies and major repairs, so it may not necessarily be a good investment idea.


Nevertheless, while all the numbers can be adjusted and played around, I believe the best time to sell a property creatively is at the prospect of a declining or stable market. While it is also much harder to sell a property in this type of market, I believe it is a better use of my cash to “guarantee” an 8% return than to continue to speculate in the real estate market.

With that being said, how would you try to buy this property creatively? Or I guess better yet, would you buy it with these numbers?

Leave me a comment below!

About Author

Leon Yang

Leon Yang is an active real estate investor in Las Vegas. He is a buy and hold guy who also likes to flip from time to time. His main passion is to traveling to the less traveled places and inspiring others to become financially independent through real estate.


  1. Hey, I would personally pass on that deal. Maybe it’s because I like to get a steal. Knowing you’re walking away with what seems like 90-100% profit wouldn’t give me that feeling of I’ve got a deal! If you can get someone who wants it, awesome, maybe I can use it moving forward. The deal I would take is $150, seller finance interest only payment (would prefer 5-6 but would do 8 to accommodate sale price). No downpayment but would assume any repairs etc immediately. Rents seem really low too. I guess I do live in a good market, here it would be more like 750-800 for a 2 bed, similar value as your 4-plex.

  2. Hi, thank you for this article, have you done a post about how to secure a seller finance deal. I mean what is the process from start to finish so that all parties, both buyer and seller are protected from any legal issues and secured that neither party can breach the contract?

  3. Hey Leon.
    Thanks for writing the article. If it were me as Buyer, I would pass on the deal. Your income to price ratio is about .6% which is pretty far below even the 1% rule. If you are paying 20% down and 8% interest you must be really struggling to find a decent rental. With your neighborhood not posting large appreciation there is nothing attractive about the property, especially if you are wanting 20K$ over market value.. The only Buyer you will get is a nube who has no experience and will probably run it into the ground. If he has 20% to put down why not go to the bank and interest about 2-3% lower?

  4. Hi Leon,

    I’m still a newbie and had two questions. One is about your handyman you mentioned where you discount his rent by $150/mo. Does that mean he takes care of all the maintenance on the property? Minus the cost of the parts of course. Is there a limit to how much labor work he is to do for that discount?

    Second question is in regards to your calculation on the 8% interest-only payment on the 5-year balloon. You’ve got 80% of $180,000 which is $144,000, and then to get the interest total you took 8% of the $144,000 leaving you with $11,520. However, the $960 a month after that is based on a 12-month period, right? I always assumed it’s amortized over the term of the loan (which in this case would be 60 months/5 years).

    Thanks for your time and the post!


  5. Terry Olivier

    I’ve just come across this old post, but I will still ask my question. I did a seller finance deal several years ago and just learned my buyer filed for Chapter 13 bankruptcy, this came out of the blue. Do you have any suggestions for me?

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