Structuring Seller Financing

[Michael Fitts]

My partner and I are considering a property that we would like to use seller financing to complete the deal. I was wondering how other people structure their seller financing deals. The property has been on and off the market since 2010 and has been owned by the same person since 2005 so we assume they have decent equity. We were thinking of the following terms:

-Minimal down payment.

-Amortized over 30 years.

-Option for balloon payment after 5 years.

-Interest only payments for the first 2 months to help us with renovations and placing tenants.

Looking for advice from others more experienced in this area!

[Andrea Weule]

I totally agree with Brendon... You get a few terms in your favor and the seller gets some terms in their favor.  The first thing to consider is what's most important to you.  Do you want a small down payment?  Do you want to avoid financing due to credit issues?  Depending on what you want focus on that.  Second, consider what you're willing to give up.  Are you willing to pay a slightly higher rate?  Are you willing to pay a higher purchase amount?  Are you willing to be flexible on your timeline for payoff?

Additionally, for me most of the time I only use Seller Financing if the property is free and clear.  If they have a loan in their name/company, seller financing is quite challenging.  As you cannot transfer it to your name/company until the title is clear or if you can assume their loan.  

I did do a fun seller finance BRRR deal once. I purchased a property with $5k down and a 90 day balloon for the final payment. It transferred into my company name. I then leased the property, and started the re-finance process with a small local bank that didn't require seasoning. The refi amount paid of the balloon in less than 90days and no additional out of pocket money.