Owner Financing, Is it a good deal?

Question

I have an opportunity for with the property below. Let me know what you guys think.

2bd, 2bath, 1 car garage which can rent for approximately $1100-$1200

The property also has an attached 1 bedroom, 1 bath, kitchen currently renting for $825.

ARV- $188, the property owner owes $186K and pays $1088 a month for the mortgage.

The property owner is open to a $5K to 10K down payment and a monthly payment of the $1088.

If I can bring in $1925 minus the $1088= $837

Rick Pozos · Answer

Lets start with the basics. You said ARV 188k and the property owner owes 186k. HELLO? Anybody home. There is no equity!!!!!

NO this is not a good deal.

Justin Robert · Answer

@Will Jimenez I think you need to factor in the costs the minimum amount you would pay to close. Title Insurance, Deed Recording, etc... Probably around $2500? That is just a rough guess. There are lots of advantages to the buyer in a seller finance transaction if structured right. You could close this thing fast and easy in theory. A few considerations which I am sure others would advise you:

1. I wouldn't do it without a good RE attorney to, at minimum, look over the contract for any glaring potential conflicts or issues.

2. I would want to determine if the current lienholder has a due on sale clause. People says its a rare occurrence for lienholders to call the note as long as they are getting paid, but they have a right to call the note due in full if they found out the owner sold it to you in a second lien position.

3. One big advantage of a seller financed note is that, in the future, you can try and negotiate a lower payoff amount If they owe what its worth, you don't get that extra bonus in the future.

I hope this helps you in some way.

Best of luck and keep us posted if it comes together!

Will Jimenez · Answer

@Justin Robert , I have never done an owner financed deal in the past. I would probably end up paying closing costs etc. and go through a title company.

Justin Robert · Answer

@Will Jimenez Will the current lienholder allow a WRAP Mortgage? Does that payment include Escrow? Who is paying closing costs / title insurance? Would you close through Title Company?