Would YOU pay more for seller financing?

9 Replies

Hey everyone!

I am wondering, if you were looking to buy a package deal of 3-4 properties consisting of ~15 units and the owner was willing to seller finance with low money down, would you pay close to market value?

I have made a great contact with a long time real estate investor looking to retire, and am in the process of closing one of her duplexes now. She has many more properties to sell, but has already done the job of finding the deals and adding value. I do not have a ton of capital right now, so buying at 20% down for every property would be a very slow way to grow, and my wife is nervous about borrowing money even from family. Would you buy closer to market value if seller financing and low money down was in place? Or continue to look for value add deals?

Thank you all!

@Eric Davenport    I will do it,  paying market value is no the issue,  did you run the numbers?  what about your due diligence?  Multifamily is a cash flow business and you will add value improving your cap rate?  are the lease on market value or you can improve it?  what is your exit strategy? 

Originally posted by @Eric Davenport :

Hey everyone!

I am wondering, if you were looking to buy a package deal of 3-4 properties consisting of ~15 units and the owner was willing to seller finance with low money down, would you pay close to market value?

I have made a great contact with a long time real estate investor looking to retire, and am in the process of closing one of her duplexes now. She has many more properties to sell, but has already done the job of finding the deals and adding value. I do not have a ton of capital right now, so buying at 20% down for every property would be a very slow way to grow, and my wife is nervous about borrowing money even from family. Would you buy closer to market value if seller financing and low money down was in place? Or continue to look for value add deals?

Thank you all!

 remember everytime you close on a mortgage you have atleast 6k+ in closing fees.

i'd prefer owner financing or a HML anyday than dealing with banks.

@Eric Davenport

I would pay more for a property if the owner did financing - especially if it meant less down payment and was an investment property. You have to run the numbers to see which provides a higher ROI and make sure the price is Not increased to a point that lowers the ROI

only if it meets your cash flow criteria.

my radar always goes up when i hear... " Local landlord with tons of units " is being so nice to sell me on terms but price point is market or higher..

they know what they have and 9 times out of 10 your paying more than they can get on the open market.. 

thats why they do it..  so just be careful on your numbers... and make sure it all works.

Originally posted by @Jay Hinrichs :

only if it meets your cash flow criteria.

my radar always goes up when i hear... " Local landlord with tons of units " is being so nice to sell me on terms but price point is market or higher..

they know what they have and 9 times out of 10 your paying more than they can get on the open market.. 

thats why they do it..  so just be careful on your numbers... and make sure it all works.

Plus 100, selling properties on terms should be over value.

@Carlos Zapata thanks for the insightful questions, I'll definitely dig into those as we analyze the properties moving forward. 

@Jay Hinrichs excellent point, we will really run the numbers to make sure it meets our cash flow requirements before moving forward. The thing that's makes me nervous about a transactions like this is the lack of equity. But I suppose this is built over time through mortgage pay down. Thanks for the reply!

After speaking with the owner, she does not want to owner finance the whole deal. She is willing to finance the down payment for 7-8 months and then we would refinance. @Elvis Vasquez unfortunately this means more closing costs and is a new expense to consider. But if the cash flow numbers meet our criteria it would still be low money down. 

I believe a podcast the other day said; "it doesn't matter what you pay for the property, whether it be below asking, asking, or above asking price. The numbers on cash flow matter". Or something to that effect. If it cash flows, I would absolutely do it. As a matter of fact, I'm looking to buy an owner financed multi family property right now. I have bank financing, but up to a certain amount for the 20% down. I can buy bigger and better with owner financing.