10 Unit Acquisition - Seller Financing?

[Dan McCarthy]

My wife and I are looking a 9 unit building in PA that cash flows really well and has been rehabbed recently. The market it is in hasn't seen much appreciation but is definitely a heavy renting area. The seller is asking $175k and I'd rather not go down the commercial loan route if I don't have to and wanted to get some feedback on possible structuring a seller financing deal. They are averaging $550 per unit currently and doesn't really need any substantial work. What are your thoughts? 

[Joseph Parker]

@Dan McCarthy from my limited experience when it comes to seller financing deals, the structure/terms that could be negotiated would greatly depend on the seller's intentions regarding the money he/she would be receiving from the sale.

Do you know why the seller is selling? Age of the individual/s? is there a mortgage on the property or will the seller experience any capital gains taxes?

For example, in my most recent deal which did not end up going through, I knew the seller wanted to sell the property because he was getting older, wanted to retire, move south and travel with his wife. He would be forced to pay capital gains taxes on the sale as well and was the type of person who would rather put money in a CD than invest in the stock market.

From that info, I felt confident/comfortable that he may be open to a 5 or 10-year lease option deal in which I'd pay him 20% down, then a fixed monthly payment for 5 or 10 years with a balloon at the end of that period. And since he wasn't looking to invest the money, he became comfortable with the idea of receiving monthly payments for a term, and we ended up negotiating the financing at less than 3% interest. That being said - the deal unfortunately didn't work out - but my point was that knowing the sellers motivation to buy and intentions regarding the money made from the sale will have a big part in determining your best course of action when negotiating/offering a seller financing deal.