i currently have interest in a package deal, the deal is 3 houses in the urban side of town the owner wants 33.5k for each or 75k for all 3 houses, 2 houses have tenants which pay roughly 900. The owner stated he would like to do the deal the traditional way and sort of shied away from the owner finance. Me and my wife have work to do on our credit and owner financing would be perfect for us to do. ( we definitely have people we know that would rent the properties so that is not an issue). Can anyone give me some advice on how I may be able to convince the owner the benefits of owner financing? Thanks to all
Is that $900 rented for each of the 2 or $900 total rent for the two? If its each I cant imagine why anyone would sell for so cheap. If its total then I can understand.
Benefits - wont be responsible for repairs, will collect monthly income for x amount of years.
The 900 is total, the 3rd property is currently vacant which he says he rents for 500 totalling 1430 for all three properties
The first way is to present them with a hard copy offer and explain the benefit to them. The first benefit would be they would be collecting interest payments, the second would be if time has passed and the property has built equity and you have defaulted on payments then the seller can foreclosure, retaining ownership again and can capitalize on the equity. Additionally, upon taking ownership, you will do repairs and invest some money into the home which will add value to it.
Lastly, ask your accountant for some professional advice on how owner financing would be beneficial to the sellers.
thanks for reply and more for the advice
@Jerrell Slay I would say for that price and the rent right it seems like a lower income type of property it seems that the cash flow would be relatively low. Even if you purchase the properties out right I don't think you would have a very big margin at all in this deal. As far as owner financing goes you must explain to them the benefits. Not only are they getting interest and principal payments every month. Give him an amortization schedule to show them actually how much they will make overtime. Also if you don't know have a CPA explain to you the benefits of the owner received as far as taxes go upon sale of their property if they own out right. These are absolutely crucial steps the closing an owner finance deal.
thanks for the great advice !
@Jerrell Slay How is your rapport with the owner? Good people skills will be very helpful right now.
Focus on "what's it in it for them," instead of what's best for you. Find out what their true concerns or objections are. If your sellers are older, keep in my mind that, in general, older folks are FAR more concerned about losing their money than about what a great return they're getting or the great tax benefits they might enjoy.
You can ask what they plan on doing with the proceeds once they sell the property. If you get a blank look or they say "put it in the bank," ask them what interest rate they're getting. If they carry a note, they'll get a much better rate than the bank and they already are completely familiar with the collateral. If you stop paying, the worst thing that'll happen is that they get their properties back. Good luck!
thanks! Andreas, very good point I didn't think of it that way!!
i believe my people skill are pretty good, I've been complimented on my people skills a lot. As of now I'm trying to build my rapport with the owner, those are great questions to ask him.
I know that this is an older post; however, I had to comment that your post was very helpful. I've had a bit of a challenge understanding owner financing, but i think your approach will be helpful as I begin submitting offers.
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