Is this seller financing scenario a Good Deal?
Property details:
Class C property. Sale price $177k. Located in Lancaster City, PA
Tenant gives me $25k down with 10% interest only payments for two years then he refinances to pay me the remaining balance.
I bought it in 2016 for $86k and put in about $10k. Current rent is $1400/month but property is deteriorating fast and needs minimum $10k put into it. It was my very first property where i made a lot of mistakes but ready to get it off my hands since i now have a solid portfolio of Class B properties.
I have a few reasons I'm getting rid of it so I'd like input on whether that seller financing scenario would be good for me. The tenant has been with me for 5 years and overall a great guy. Properties in this area are sitting on the market for quite a while now so I don't know if it's worth the risk putting it on the market and then getting less than what I could sell to him - not to mention, agent commissions and all that....
Thanks in advance.
#4 All Forums Contributor
- Plymouth, MI
Do you have any debt on the property?
To me, that sounds like a good price. I would give the tenant an option to purchase rather than transfer the title. This will save you from capital gains and make things simpler if he/she is not able to close in two years. You would have control over the insurance coverage, as well—you don’t want the tenant to under-insure or keep an insurance payout and leave you stuck with a building needing major repairs.