What risks am I missing? Seller Financing

6 Replies

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The $400 payments discounted at 6% are worth $36,000.

Hey Joe,

First off sign nothing unless your lawyer says so. Most all deals start of good, like this one does but then can go south. I would have your lawyer write up the contract and let him close the deal. If buyer defaults then you will have to file for foreclosure, Depending on your state it could take a year or more. The cost will be high, If your lucky he may give property back to you in lieu of, And that could come with more cost like water bill, back taxes and any other liens. Also you should have a third party do the credit check. That leaves you out of the emotional equation.

I'm not saying not to do it just understand the risk and decided whether you can stomach them.

Why are you not having a management company handle it for you?

Why are you wanting to hold the note?

Proof of payment of taxes.
Proof of insurance naming you as lien holder.
You may want a minimum interest rate just to satisfy IRS imputed interest laws.
I would look at more than credit on a long-term loan on this collateral. Income/employment, taxes, etc.

Can you shorten the term to reduce your exposure, even if it means a lower purchase price?

Good luck.

Mike

I'm in a similar boat. I have 10 units between 2 buildings I'm trying to unload for a 1031 exchange into a 25+ building.

Problem is finding a building to exchange in to. I've listed my buildings with an agent. So I hope to have them sold soon. But I have seen some buildings sit on the market in my area for months. I have priced it pretty well with a 9.5%CAP so I'm crossing my fingers that it will sell soon.

Let me know how your deal turns out. I'm interested to hear the outcome.

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