Owner Finance deal - good or bad

[Yulia Kaygorodtseva]

Hello, I am trying to do my first Owner finance for my house which is already paid off. I was offered 10% down cash, 7.5% interest balloon and five years, and that they want to refinance in 2 years probably. 

What do you suggest?

thank you!

[Moe Ahmed]

Personally if I were you I wouldn't do it . I know the interest is great but you're tying up so much capital in that property that you wouldn't have access to for atleast apparently 2 years. This is an opportunity cost that you should consider. Where I live properties are appreciating 15-20% year over year so what you're suggesting would be a losing proposition here in Toronto. You might want to see how much properties in your neighbourhood appreciate to calculate whether this is truly beneficial to you

Also FYI now that I think of it 7.5% isn't that great atleast where I'm from. Investors here can invest in Mortgage Investment Corporations that on average pay out 7-8% net on your investment without any head aches.

If you are passive and just looking to make money off a mortgage then at the very lease I would ask for more than 10% from the buyer. If that's not possible then you should vet the buyer's financials and credit at the bear minimum