For those of you out there who have done seller financing in the past (as the buyer or the seller) what is your experience with this, and what terms did you end up coming to in the end? I just purchased a 12 unit, and really like the numbers when you do economies of scale. Would like to get more units under my belt, but a little cash poor at the moment. Looking for some advice/guidance on seller financing topic. Thanks in advance!!!
@Warren Straley I have closed a 16 unit and closing an 8 unit using 80% with the bank, 10% to 15% on a seller 2nd position note and I only bring 5% to 10% to closing. Has worked well for me but finding motivated sellers willing to keep some skin in the game for 18 months to 36months is tough since there are so many buyers. Finding a bank to work with this structure can be tough buy clearly not impossible.
Terms on my 16 unit were 15% of the purchase price at 2% interest rate on a 10yr amortization with a 3 year balloon.
New deal is 10% of the purchase price with 5% interest rate on a 20yr Amortization with an 18 month balloon.
Let me know if there are any questions you have!
@Warren Straley , I have closed on a 18 unit with seller financing, and 4 additional units with seller financing (aka land contract). The 18 unit was purchased with 25% down, with interest rate at 5% for 5 years, renewable for a further 5 years at 6%, with 20 year amortization. We're currently 4 years into the loan and looking around at refinancing options, to pull some equity out (the property is probably worth twice what we paid for it) and to lock in a better rate than the 6% we'll otherwise pay.
Our land contract / seller financing was arranged with the blessings of the community bank that holds the mortgage. In actuality, we pay the bank and the bank applies our payment to the original loan, so it did not have to go through underwriting again. The closing was held at the bank.
On the other 4 units, we purchased 3 units with a land contract with 20% down and the balance over 6 years at 5%, and the 4th unit has a land contract with 40% down, with the balance paid over 4 years at 5% interest.
Hope this help. Good luck.
@Ken P. , so you did 100% seller financing then. Do you think a seller would ever do it with 0% down, or using another property as collateral? I don't want to over extend, but just keep thinking that time is the only thing I will never be able to get back, and the sooner I get more the better.
@Warren Straley Never is too strong a word, but what incentive would a seller have to trust you (or any buyer, for that matter) to the point of extending 100% financing? I've never done that, the smallest % down has been 20%, and that was after I had a track record of running properties in that area successfully for several years. With no skin in the game, a poorly performing property (the only type that is likely to need to be sold with a large portion of seller financing) could be run even further into the ground with no losses to the buyer, leaving the seller in a much worse position than when they started.
I have done several seller financing deals in the past year. Check out this blog I wrote on BP: https://www.biggerpockets.com/blogs/10145/65876-little-to-no-money-down-in-a-hot-market
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