Intra-Family Seller Financed Opportunity

Starting Out
7yFollow

Intra-Family Seller Financed Opportunity

Jenni Fors
Member since 2019 · 2 posts · 0 votes

My husband and I have been considering getting into real estate, but didn’t know what method was going to work best for us. His grandmother has just moved out of her home of 66 years to a senior living facility. At the same time our son is also looking for a place to rent. We’d like to purchase the home and rent it to our son and his friends but don’t have cash for a down payment right now. We are going to propose a seller-financed-type deal to his grandmother  as a way to keep the home in the family, but don’t really know where to start. One of our biggest concerns is that she’s over 90 years old and need to include a clause regarding continuing the contract after she passes, knowing that it might not be a long time and we still may not have the cash to pay off the remainder. Any suggestions regarding writing a rental contract with a family member would be welcome as well.

0Reply
21 views

1 Reply

Jump to latestLatest
  • Jake Denning
    Flipper/Rehabber · Houston, TX · Member since 2019 · 42 posts · 20 votes
    7y

    Hi Jenni,

    So I am not sure what your situation specifically is (financially) but if you could not get a typical loan from the bank and get as little as 3% down then Seller finance could be a good option. Assuming she has not done any Refi's and she owns the property free and clear this is a "classic owner finance" My personal opinion would be first that you hire an attorney to draft these contracts (always when its a seller finance) the legal fees in Texas (my state) are usually between $700-$1000 for them to draft the contracts & notes for this to legally happen.

    Where you should start- You need to know what the property is worth and then typically you would add another 10-15k to it as it will likely appreciate in the next 15-30 years. TYPICAL seller financing is done at 8-10% so for example on a 200k note that would roughly equate to a $1,468 payment- THERE are MANY other costs to owning a rental so make sure to read up on some of the rental investing info on BP. The only potential issue here is that 8-10% is a pretty high-interest rate so make sure your market rents will allow you to make this payment and STILL cash flow each month.  The other part to take into consideration is that this is family so you certainly don't want to step on any toes and make anyone feel like they have been taken advantage of. As far as the second part and her passing away the easiest way to make sure the transition happens from my unprofessional opinion it would be to add your husband's name to the deed as a joint-tenant and then when she passes he will just take full ownership. My full-time job is in the probate industry and the transfer of property when there is NO will or Joint Tenant can be expensive especially if that is the only property owned by the decedent. BE SURE TO CONSULT AN ATTORNEY IN YOUR STATE! It will be well worth the expense to make sure the estate is properly handled PRIOR to her passing (this is crucial!) I would also advise that you shop out several attorneys that will give you a no-obligation consultation so you can get an estimate on the cost for free. There are LOTS of attorneys out there who will gladly take advantage of unknowing people. 

    I hope this info helps and if you have any questions feel free to write back here or PM me.

    Best,

    Jake

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free