Can i sell my duplex that is paid off and offer financing to the buyer?

Question

Question I have a duplex that is paid off. I listed it for sale and haven't had a lot of action on it. Its paid off already. Can I sell it and offer like a 5.5% interest rate and carry the deed for the house? Lets say I sell it for 500,000 thousand and require 20% down and charge 5.5% or 6% interest rate on the remaining balance? Just curious if this is something I can do individually?

thanks

Ian

thanks

Ian

Basit Siddiqi · Answer

If you can't find a buyer now. Seller financing might get you more offers. Some offers may come from investors but others may come from those who are unable to get traditional bank financing.Also be mindful that the interest component of seller financing will be treated as interest income and taxed.Best of luck to you!

Ashish Acharya · Answer

@Ian Russell Yes, you can absolutely offer seller financing on your paid-off duplex, this is called an installment sale, and many individual sellers use this strategy to help close deals when buyers can’t get traditional financing or to create ongoing income.

Here’s what you should know:

• Yes, you can do it individually: As the owner, you can act as the lender. You’d draft a promissory note (loan agreement) and secure the property with a deed of trust or mortgage, depending on your state.
• Terms are flexible: You set the sale price (e.g., $500,000), require a down payment (e.g., 20% = $100,000), and charge interest (e.g., 5.5%–6%) on the remaining $400,000. You and the buyer agree on amortization and whether there’s a balloon payment.
• You receive monthly payments: These include principal and interest, creating passive income. If the buyer defaults, you have legal rights to foreclose or take back the property.
• Tax treatment:
You’ll recognize capital gains gradually using the installment method (IRS Form 6252).You’ll pay ordinary income tax on the interest received each year.This structure spreads out your tax liability and may keep you in a lower tax bracket than if you received the full gain all at once.
• You’ll recognize capital gains gradually using the installment method (IRS Form 6252).
• You’ll pay ordinary income tax on the interest received each year.
• This structure spreads out your tax liability and may keep you in a lower tax bracket than if you received the full gain all at once.
• Legal protection matters: Use a real estate attorney to draft the agreement properly and record the lien. Also ensure the buyer is creditworthy, treat it like any lender would.

• You’ll recognize capital gains gradually using the installment method (IRS Form 6252).
• You’ll pay ordinary income tax on the interest received each year.
• This structure spreads out your tax liability and may keep you in a lower tax bracket than if you received the full gain all at once.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Ned Carey · Answer

@Ian Russell yes a lower interest rate will make the property more desirable and probably easier to sell. However there can be other advantages to the buyer other than a low interest rate.

You may offer 100% financing or at least a higher loan to value than the buyer can otherwise get. You might be able to finance someone who can't qualify for a more traditional loan. In these cases you may not need to offer a lower rate.

Keep in mind that an investor buying vs a homeowner will be paying higher rates anyway so your rate may not need to be as low as a homeowner can get for someone who is buying strictly for investment purposes.

Unless you are priced high or have a tough to sell property I don't think you need to be as low as 5.5% to make owner financing a benefit for the buyer.

Chris Martin · Answer

Yes, you can. It's done all the time and called an installment sale. See Publication 537 (2024), Installment Sales for details. I have one in process now that will help with my capital gains tax planning. The assumption is you have a capital gain, which is required by IRS rules. Just make sure your note and recorded deed-of-trust are prepared by an attorney and marketable to a would-be note buyer in case you want to cash out some day.

Ned Carey · Answer

Yes absolutely. It is typically called "owner financing". Any good Real estate attorney or title company can help you with this.

The "instalment sale" term mentioned above referrers to potentially advantageous tax treatment on any capital gain on the property.

Brad S. · Answer

Yes, you can structure however you want - as long as it is legal. But, I would look into doing a lease-option (L/O), where you offer it to someone who would not be able to afford a down payment, but they can afford a higher than market rent. You can market it for sale as "no money down" "no down payment needed" etc, and then explain it to interested people. You can possibly ask for a higher than market rent and credit part of it to a future down payment - if you choose to. There are some people that have good cashflow/income but can't traditionally qualify for a loan, so this may work for them.

The benefits of doing it this way is you get more people interested, who would not otherwise think they could buy a house and also you keep control of the title, until the tenant/buyer is able to qualify for a loan and complete the sales contract. If you sold it as an owner carry/financing, as you mentioned, you would have to go through the foreclosure process if they stopped paying you. If you set up a lease/option correctly, you only need to evict them, as a typical tenant. But, you need to check the laws in your state. As an example, TX has some stringent laws with respect to L/O's.

I'm not going to go through all the details on L/O's but there should be plenty of info available online.

Good Luck!

Ian Russell · Answer

Really appreciate it Ned, makes sense

Ian Russell · Answer

Thanks on last question.  I am assuming I would offer a lower interest rate than whats currently being offered to get more interest in the property?

Can i sell my duplex that is paid off and offer financing to the buyer?

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