Seller Financing/Owner Financing

21 Replies

If you want seller financing you can't be picky about the property, seller financing is fairly uncommon so it is unlikely that the best properties will offer it.  Also it is usually more expensive than traditional financing so if you would qualify for traditional financing you might want to explore that option first.

Someone gave me great advice recently rather than asking about financing. 

Ask if they own property outright then ask what they are going to do with the cash. 

If they own it and are going to put it in that bank then offer to borrow the money from them and pay on a monthly basis to they get more money than they would in the bank and then avoid taxes too

In an ‘up’ market owner financing is not used much, think unicorn.  In a ‘down’ market you can see this much more often as owners try to get ‘out’ in tact.

Might go to my profile and to my posts, there are probably 1,000 posts on this topic, I can't write them all over again :)

Additionally, if it is for investing then put on the face of the note "Commercial Note" you will avoid tons of regulatory issues as a commercial loan. All the best....... 

When we 'do' seller financing, we're usually on the selling side.  I assume you are asking for SF as a buyer?

I 'pupil' I took to an appt of a tired landlord recently liked my phrasing of this: "You've owned, managed and maintained this piece of crap for 32 years. It is finally payday. Would you like it all in one shot and done, or would you like to be paid every month for years to come?"

He would like it for years to come, but needs $50k to build a shop.  My handy pupil and I are working on ways to build him a shop now, for hopefully $20k or so.  We'll see...

Originally posted by @Aaron K. :

What @Daniel Harbuz said is decent advice, but don't tell them that it is tax free, because it isn't

Thanks, and yes for sure dont tell him its Tax free sorry for not being clearer. I was sloppily alluding to the fact that some people will pay less tax on payments spaced over a few years than a lump sum but it does depend on their situation. 

When approaching seller financing, make sure you can explain the process in clear detail first. Then, tell the owner why it's more beneficial for them to space out the payments over the years rather than a lump sum. For example, tell them how you can provide them a stable income over the years without having to deal with tenants, toilets, or trash. All about how you frame it and look at it! It is possible.

Owner financing seems to work well with houses needing minimal work while acquiring them at 70% or less than the ARV, from what I've seen...

Hello BP family I am a new investor in the Charlotte Area. I found a home through another wholesaler that I think could be a great owner finance deal. The Wholesaler is pitching it to me at 108. I'm thinking if I could get it at 95-100 or so it would be a great deal. Comps seem to be at 142,000. There seems to be little work to get it up to rental. But not enough spread to flip a contract. Thinking about using hard money to update. Then Airbnb. Or should I try to partner up? Anyway how do I go about offering owner financing? How do I convince the owner to owner finance? Do I need a down payment? Do I just need a real estate attorney for the paperwork? Will they draw up a prommisary note and tell me how much my payments will be before hand? Can I ask to hold off payments until I start renting it out? Thanks! Bee Kindred Culture Investments LLC

@Devan Ludden  

Would this be a good spread sheet to send to an owner? I am working on a letter plus spread sheet that would show an owner who may be unfamiliar with the process the benefit should it be conducive to their financial situation. 

Is this too much or should I add something else to this?

Thank you

@Rich Hupper I probably wouldn’t attach that spreadsheet, it’s a bit more than the average joe landlord would want to look it. Instead, just write a simple letter saying you’re interested in buying their property in a way that provides them with truly passive income without tenants, toilets, and trash. Keep it simple. Cater to people’s desire for passive income, because that’s why they get in this game, not to fix toilets

@Devan Ludden  

Okay thanks for your input. Aside from that do sellers typically want a down payment? Or will some of them do 100% financing.

@Rich Hupper It really just depends on the seller, each one is different. Give them multiple offers so it is an “either or” scenario instead of a “yes no”. Honestly, with the market we’re in, take advantage of the seller’s greed for highest possible price and offer 0% interest. I know there are some people out there who have been getting those kind of deals

@Devan Ludden - What do you mean 0% interest? You mean offer the seller a much higher price but at no interest and then make monthly payments back to him? Everything I've read has been saying the rate would be higher than current bank rates. Thanks in advance for the clarification. 

@Karen Bivans Yes, you offer the seller a slightly higher price at 0% interest. That way, the sellers get more money, since you are going with them instead of a bank. However, you pay WAY less over time, and you control the payment.

@Dominique Mickles In a sense, yes, you just have to calculate the total payments made and compare it to your total price for owner financing at 0% interest

@Devan Ludden Interesting, haven't heard of that yet.  Great idea. 

@Dominique Mickles This is a very crude example with so many factors left out but you'll be able to see the difference.  Lets say you see a house for $100K asking price.  

Option 1: Pay $100K on 30 year loan at 3% interest.  Over 30 years you will pay $100K (principal loan) AND $51,777 in interest for a total of $151,777.  

Option 2: Pay $110K for the house at 0% interest over 30 years.  That means each payment you make goes directly to the principal loan (since there is no interest), so over 30 years you'll pay $110K.  

good luck finding someone who will sell a property with no money down or for a 30 years loan No one is going to want to do that stuff and for good reason . Offer 5-10k down and monthly payments of half the rent amount for up to ten years with NO balloons ! Try to get interest rate under 6%