Should I owner finance a property I was looking to 1031 exchange?

[Brooke Melton]

I purchased a condo in Portland back in 2005. I lived in it for a few years before renting it out when I moved away for grad school. Over the years, the property has consistently cash flowed—and at times, quite significantly—up until recently.

Unfortunately, the Portland riots impacted the rental market, and local rents dropped. My unit, which used to rent for $2,100, is renting for $1,800. On top of that, HOA fees recently jumped by nearly $200/month—bringing the total to $649—which has completely wiped out the little cash flow I had left. I still owe about $64K on the loan, and the property is currently worth around $360K. Condos in the area aren't moving quickly, and holding the property without a tenant could become expensive fast.

Just the other day, I got a call from an investor who expressed interest in buying. They initially mentioned a subject-to deal and then pivoted to owner financing. I’ve never done seller financing—on either side of a deal—so this is new territory for me. I typically stick to more conventional strategies, but I’ll admit I’m intrigued. Skipping agent commissions and redirecting some of that savings toward a strong legal team to handle the paperwork sounds like a smart tradeoff.

That said, I’m still in the exploratory phase. My original plan was to do a 1031 exchange and roll the equity into two other investments. I do have the cash to fund those without using a 1031, but I liked the idea of reallocating the equity without tapping into my brokerage or money market accounts.

I know there are risks with seller financing, but I’d love to hear from those with firsthand experience—what worked well, what didn’t, and what unexpected lessons you learned along the way. Any insight would be much appreciated!

[Ryan Spath]

What are your long-term goals?

That’s the key question here. Let’s break it down with the current numbers:

• Condo value: $360,000

• Mortgage balance: $64,000

• Estimated selling costs (9%): ~$32,400

• Net proceeds: ~$263,600

With a 1031 exchange, you could roll that equity into a $1M investment property, leveraging up significantly. That opens up an entirely new tier of assets—potentially multifamily, small commercial, or a premium single-family rental in a top-tier market.

Here’s a long-term vision:

• A $1M asset appreciating at 5.5% annually becomes roughly $2M in 15 years.

• You continue building equity and possibly increasing cash flow depending on the asset class and financing structure.

So, the question becomes:

• Do you need the cash flow now?

• Or are you still in growth mode, with a solid income and long-term outlook?

If you’re not reliant on the immediate cash flow, this is a prime opportunity to scale up your portfolio significantly using your existing equity.

On a personal note, I’ve purchased via owner financing—great terms upfront, but the rate adjusted every 5 years. It was structured to encourage me to refinance out eventually, which makes sense for the seller too. Creative financing can be a fantastic tool if the terms fit your goals.

Also, just my take: I’m not a big fan of condos long-term. HOAs can be unpredictable—special assessments, shifting board rules, etc. You don’t control enough of the variables.

Whatever path you choose, you’re in a strong position. It just comes down to matching your next move with your long-term objectives.