Seller Financing Question

[Angela Beers]

I need some ideas on how to pitch seller finance for purchase + rehab! 8 units, vacant, needs a full reno from office spaces to 8 apartments. Purchase price 700K reno 500K all in 1.2M. ARV 2.2M - Exit strategy DSCR 30yr - cash out refi. Thanks!

[Lee Yoder]

@Angela Beers, if I'm the seller and you ask me about seller-financing, I've got to see how seller-financing is better for me than selling it in a traditional way. I believe you can offer 3 benefits:

1) Decrease the seller's tax bill by spreading out his gains. 

2) Increase his return by paying him interest on the money he is loaning you.

3) Give him a piece of the equity you are going to create through your repositioning. 

Here's an idea: what if you get a loan for $700k, but the seller agrees to a purchase price of $200k and let's you put the other $500k back into the property. So, he's only paying taxes on a $200k gain. 

You can pay him 5% interest on his $500k during your repositioning, and then give him another 5% on the back end when you complete your cash-out refinance.