Owner finance deal.

6 Replies

Just submitted my first written offer for a non traditional owner finance purchase. 

Verbal Agreement until next week. 

Just curious to know how others structure their own seller finance deals. 

Property Info: 

3/1 

3k needed for rental rehab. 

Price 60k. 

I offered 45k @ 5% for 15 years. 

Payment : $355.86

Balloon is being negotiated. Preferably 5 year.

Market rent $700-$850 

No Money Down. 

Warranty deed into my name. 

Title policy in place.  

Let me know what you would do differently. 

Thanks!

Congratulations for taking action!

Rule number 1: Seller asking price is irrelevant when you're an investor.

What do you believe the ARV is? And what is your basis for it?

I'm assuming you're strategy is buy and hold.

With rents at the low end of $600 you're just a hair over the 50% rule. And you're between the 1% and 2% rule but closer to the 1% rule.

Assuming the $60K is ARV you're a little above the 70% rule. You're around the 75% mark. What would I do differently not much. Just ensure your ARV and market rents are accurate and hope the seller bites.

Looking forward to what the seller responds with. This is why this business is so fun.  What will the seller come back with? It's never the same... never! Every deal is different.

Thanks Paul! 

ARV: 70k

Seller has verbally agreed to terms. 

We will see if he changes his mind. 

Hello Paul Thompson Can you help me out with explaining what the 50% rule is? I'm in the learning stages and just trying to figure out all the different language/rules out there. Thank you.
Originally posted by @Benjamin Blackburn:
Hello Paul Thompson

Can you help me out with explaining what the 50% rule is? I'm in the learning stages and just trying to figure out all the different language/rules out there.

Thank you.

 The 50% rule says that total operating expenses for a rental will at least be 50% of gross monthly rent. $1000 rent = at least $500 expenses. But I would recommend using any "rule" more like a measuring stick rather than a rule. I recommend still running hard numbers to calculate the exact amount of expenses. The measuring sticks are just a quick way to analyze a property.

Hope this helps!

Sincerely, 

E. Harris

What about other cost such as buyer's closing costs and insurance? I do not see any allowance for maintenance. Are you factoring in expense from the gross rents minus the payment? Its looking thin to me so pencil this out more completely. 

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