How to Purchase a Triplex with Owner Financing
I found a Triplex that I was interested in, but passed on it initially because I didn't have enough capital to hit 25% + 6 month reserves for a conventional loan after another purchase I recently closed. Seller had an offer that was pending so I needed to move quick if I was going to offer. It turned out that it fell through and the property is still available. So after more than a month the seller's agent contacted me to see if I was still interested and ready to go.
Little closer, but still not there so I thought about how I might be able to make this happen... The current owner has been in the process of cashing out several Triplex's over the last couple year's and was getting out of managing rentals so I thought they might be open to owner financing. I'm a complete noob in this area, but I thought it was worth a try after reading Chad Carson's blog post on some creative financing options. It turns out the owner is totally open to it. But now I've gotta figure out all the details and make it happen! =)
Here are the loan terms:
- 15% Down (They Initially proposed 20%)
- 5-5.5% Interest
- 10 Year Balloon
- Purchase Price $170,000
I'm just having the offer drafted in writing tomorrow so I wanted to get your feedback to make sure I start out on the right path with this.
Questions:
- What should I have spelled out in an offer like this? For example - No early prepayment penalty? Additional/different contingencies?
- Are there other items to pre-negotiate?
- Should I pull in a lawyer at this point?
- What do I look for in a lawyer
- Is the amortization schedule going to work out the same way as a conventional loan?
- Do I expect points on the loan?