Seller Finance Deal or No Deal

5 Replies

We have an opportunity to purchase a 10 unit on owner finance. Down payment 15% 30 year AM, no prepayment penalty at 8.5%. With these terms, we would net under $100 a door. We will have a debt service on raising the down payment as well. Thanks for your feed back

@Will King no way I would be interested in that deal; seller is being way too greedy and may have overpriced the property as well. If you were to get the interest cut in half what impact would that have on your financial picture? The seller still gets the same capital gains tax incentives and won't have to pay as much tax on the interest collected. More negotiation is in order, either that or find another deal.

@Will King 30 year amortization and less than $100 per door, to me, means you're paying too much for the property.

If this is just the opening negotiation point, then I would counter with a lower price, same terms, with the Hope's that you can add some value over the next year or two, and refinance into lower interest rate financing.

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@Will King not enough info to completely answer.

Take financing out of the equation, do you have the ability to add value to the property to make the property value increase in a couple years other than just normal appreciation.

That is more important than the owner finance or not question.

Good food for thought from everyone. I will be negotiating down the price today. I have later found out that he purchased it on owner finance, so that why he would need the 8.5% APR. I will recheck today on the rents to see if they are below market. Great feed back. Thanks

@Will King

If you have 15% down, go the extra 5% and get commercial financing at about 5% interest.