OWNER FINANCING

10 Replies

Hello everyone, I have this owner financed deal on the table but don't know if its a deal or can it be made into a deal from an investors point of view.

3bed 2bath  1,494 sf Features: Pool

Listing Price 159,900

20% to 25% down

Property Taxes 1,774

Rents 1,600-1,800

comps 130,000 to 150,000

Any feedback is greatly appreciated.

Can't answer without knowing the term and interest rate from seller.

I buy houses using seller finance all the time. If sellers interest rate % is low enough actual buy price isn't so critical.

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Well I offer 1% above current bank deposit rates and go for a 30 year am with ten year earliest call.

I have bought a number of homes like this at 1.7% interest recently.

Obviously you can pay more the process is to work out what your max interest rate is to make it cashflow. Sometimes sellers only want to finance short term and this will kill the deal. You need low interest money long term to get the principal down fast so it stops being upside down.

Originally posted by @Dean Letfus :

Well I offer 1% above current bank deposit rates and go for a 30 year am with ten year earliest call.

I have bought a number of homes like this at 1.7% interest recently.

Obviously you can pay more the process is to work out what your max interest rate is to make it cashflow. Sometimes sellers only want to finance short term and this will kill the deal. You need low interest money long term to get the principal down fast so it stops being upside down.

Interesting stuff.. so I have a deal on the table right now and maybe if you can use mine as an example it will help the poster. It's a house worth $380k and my offer was $456k over 7 years at 1.88% with $20k down. Paying $1570/mo which leaves me a small amount of cash flow based on market rent of $2400. What's throwing me for a loop is the contract I have has me receiving the deed however the seller wants to keep the deed until I pay him off in 7 years. So my understanding is that my hands are tied and I can't sell the property, move the note, or do anything with the equity without paying him off. Do you have any thoughts on this? I learned what I know from another investor but am not in contact with him any longer

Nick that to me is like a lease option not seller financing. WOuldn't work for me because as you say your hands are tied. Seller needs to understand that with a first position lien they are secure. If anything goes wrong they can get the property back.

Originally posted by @Ricardo Salter :

Hello everyone, I have this owner financed deal on the table but don't know if its a deal or can it be made into a deal from an investors point of view.

3bed 2bath  1,494 sf Features: Pool

Listing Price 159,900

20% to 25% down

Property Taxes 1,774

Rents 1,600-1,800

comps 130,000 to 150,000

Any feedback is greatly appreciated.

 First work backwards to determine what the property can afford to pay. Conservative income and expense estimates, vacancy, reserves, etc.  Then have a conversation to find out more about what the sellers situation is.  Then design several solutions that address the sellers wants & what makes sense for you as an investor.

Best of luck

@Dean Letfus I see that you mentioned buying homes on seller financing with an interest rate of 1.7%. This appears to be a really great rate. I am interested in learning about your experience in obtaining such a low interest rate. Is it due to market conditions in your area? Are there specific incentives that you use to encourage sellers to finance on the terms that you mentioned? Thank you and I look forward to your response.

Hi Karen. We offer 1% above bank deposit rates so for any seller who is going to put the money int eh bank this becomes an option. Our typical seller at these rates is an older baby boomer in a good financial position not wanting to discount their price.

Whether you get title or not while the seller carries the financing for you is a much bigger issue than the interest rate.  Looks like @Nick Luongo is referring to a land contract / contract for deed. NEVER BUY ON A LAND CONTRACT.  Hands are completely tied as far as refinancing, selling or a million other things, plus if the seller gets in a financial bind of any kind, liens can attach to 'YOUR' property.  Use a mortgage / deed of trust, real estate contract or whatever method gives you title in your area.  Once you know the property will actually be yours, then work backwards to see if the numbers work.