Do sellers make more money when they sell on terms or cash

6 Replies

By selling on terms I assume you mean with seller financing? The advantage of the seller financing some or all of the price is that they usually can get a higher price. They can also get a higher interest rate than one could get at a bank.
The negative part would be that the money is tied up and not available to fund other deals which could have a high net return.
Seller financing can create a very passive income stream so it's a good plan for those looking for cash flow.

I always pay more than a cash price when a seller will give me terms.  

Sometimes the seller will lose in taxes if they sell for cash!  This means terms is definitely their right option.  Every situation is different which is why the answer is always "it depends" 

Originally posted by @Fili Aguirre:

@Adrian Smude taxes? Do you mean capital gains?

Correct.  So if someone has owned a property for a long time they have to recapture the depreciation over the years which adds to their tax liability I’m not an accountant, but I believe it’s best to sell on payments unless you have a better use of the money  when you sell on payments I understand it to be that you only pay taxes on the amount you collected that year  

Hi @Account Closed it depends on the deal. We just closed a deal with a 32 unit multifamily property where we paid the seller a little more up front so we can get more cash flow over the long term. Sometimes you can get a lower price if you can pay a higher interest rate and sacrifice cash flow. The beautiful thing about seller finance is the structuring options are endless. Hope that helps!