Muddy waters seller financing.

24 Replies

I have a deal in the making that I’ve never done. Here’s the scoop It’s seller finance. Cash would be $159k

I would need to discuss this with my attorney but the nuts and bolts would be $184K purchase price, 7% interest only for 10 years with 20% down.

I’m looking to make sure my formula is correct but would like for members to break this down. Thanks 

Hi Jason 

Breaking down $184k at 7% for 10 years with 20% down. im trying to see if I’m heading in the right direction. I broke it down in the rental calculator. But trying to be clear headed. 

I calculated $2,136.40

I guess I’m trying not to be chasing emotion

We gotta have more info. 
How many units? Predicted Income/Expenses? What is the current market value of the property? It could be a great deal if you can cash flow and the property is in an area that appreciates so you could refinance in 10 years when it is worth much more than your loan. 

Excellent opportunity to purchase vibrant mixed use property in bustling part of town and only .3 miles away from Route 2! 4 apartments on upper level are fully rented. 2-2BRs @ &750/mo and 2-1BRs @ $650/mo. Landlord pays for oil heat. Separate water heaters and electric for tenants. Coin-Op laundry on site. Also, bright and spacious commercial unit on first floor is currently vacant and boasts a welcoming reception area and updated 1/2 bath. Many recent improvements here and ample storage in both attic and basement. This understated premises awaits your strategic acquisition

Monthly income $2900

Expenses @2407

Cash flow $492

Pro for a cap 7.65%

COC 14.13%

CAP 8.81%

@Angel Dejesus I’m pretty sure you can’t build a 4 unit for under $50k a unit. So if the cash flows plus you got a commercial space, I’d say go for it. I’m just breaking into real estate (2 years) but every piece I’ve bought has been with a 20-35% seller financing. I’ve had to put very little cash into my properties, as I’d rather use OPM! Time is my friend.

@Angel Dejesus Hey Angel, 

This is how I would structure the deal for Seller Financing, one of my most favourite ways of taking a deal down. 

Purchase Price: $184k

Downpayment [20%]: $36,800

Monthly payments to the seller [Amortized over a 30-YR term (instead of the 10-YR approach)]: $1,133

Exit: 10-year balloon payment

In 10-years: Balance to be paid will be $150,629.

In these deals, I'd advise is to reposition the asset quickly and REFI in a few years in order to get the Seller out of the deal. 

Hope this helps. Goodluck on the deal. Thanks! - Ola 

Originally posted by @Ola Dantis :

@Angel Dejesus Hey Angel, 

This is how I would structure the deal for Seller Financing, one of my most favourite ways of taking a deal down. 

Purchase Price: $184k

Downpayment [20%]: $36,800

Monthly payments to the seller [Amortized over a 30-YR term (instead of the 10-YR approach)]: $1,133

Exit: 10-year balloon payment

In 10-years: Balance to be paid will be $150,629.

In these deals, I'd advise is to reposition the asset quickly and REFI in a few years in order to get the Seller out of the deal. 

Hope this helps. Goodluck on the deal. Thanks! - Ola 

looks like this will be the approach 

@Angel Dejesus just google interest only mortgage calculator and 1000 of them show up which will show you your monthly payment.

@Angel Dejesus 184k with 20% down would equate to $147,200 financed. The interest-only payment at 7% would be $858.67. If it is interest only I'm not sure where you are getting $2136.40 from.  Was this an interest only loan, a fully amortizing 10 year loan, or a 30 year amortization with a balloon payment due at 10 years?

Originally posted by @Zach Lemke :

@Angel Dejesus 184k with 20% down would equate to $147,200 financed. The interest-only payment at 7% would be $858.67. If it is interest only I'm not sure where you are getting $2136.40 from.  Was this an interest only loan, a fully amortizing 10 year loan, or a 30 year amortization with a balloon payment due at 10 years?

break that down. Brotha. That’s sounds better than ola. Wondering how you got that

I’m not familiar with seller financing but would your monthly payments be interest only? Is that how seller finance typically works?

@ola Danits

Am I missing something with your loan math? You have an ending balance higher than the starting balance? $184k minus 20% equals $147,200 loan. But an ending balance over $150k?

I didn’t notice the City but a fourplex for $184k sounds great before commercial space.

Any chance of moving in to a space for low down house hack? Even not living there a bank should accept 20-25% down investment. Under 7% for sure.

@Angel Dejesus shoot me a PM, Im a real estate agent in Boston, and am familiar with and have done deals in Seller Financing before. To be honest, im not sure why you would do 20% down and 7 % interest...You can go get a conventional product from a bank with 20 % down out here. Further, 7 % is crazy right now, and if the reason you are going seller financing is because a bank wont finance it, save your money and buy a  better deal. 

I can send you some good tools on top of the BP stuff to analyze the deal too. 

And @Zach Lemke is on point here, if you have an interest only loan, you will obviously never decrease the original loan balance, and since its interest only its just the original loan amount, 147k he mentioned. x. .07, for 7 % interest, / 12. No amortization needed since you mentioned interest only. I still stand by my original post. 

Originally posted by @Ola Dantis:

@Angel Dejesus Hey Angel, 

This is how I would structure the deal for Seller Financing, one of my most favourite ways of taking a deal down. 

Purchase Price: $184k

Downpayment [20%]: $36,800

Monthly payments to the seller [Amortized over a 30-YR term (instead of the 10-YR approach)]: $1,133

Exit: 10-year balloon payment

In 10-years: Balance to be paid will be $150,629.

In these deals, I'd advise is to reposition the asset quickly and REFI in a few years in order to get the Seller out of the deal. 

Hope this helps. Goodluck on the deal. Thanks! - Ola 

 Update: $147,200 amortized over 30YRs at 7% will give a monthly payment of $979. 

The balloon payment will be: $123,951

All good points thanks. 

I’m out weighing  my options. Never done a seller finance. So in actuality the reason why I would do seller finance is start being more confident with opm and more private options. 

But checking what systems to use. 

Thanks guys. Just waiting to see what the seller would do. 

But the seller also ask for $152k cash. 

Would anyone dispute doing hard money just to get that deal done than to get a conventional mortgage?

Well guys I decided to go with a commercial bank. purchase price $159,000k. 25 year amortization at 5.5%.

But next project will be looking for owner finance or scaling way up next goal will be a 10 to 20 mixed use property.

Thanks guys for responding much appreciated. 

@Angel Dejesus Congrats! Looks like a good deal. What town is this in?

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