Owner financing - What are fair terms in your opinion?

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Owner financing - What are fair terms in your opinion?

George PaquettePro Member
Investor · Member since 2020 · 39 posts · 20 votes

I am looking at a property to BRRRR for $300k and I threw it out to the owner to owner finance it. She said yes and for what terms? I wanted to get some ideas that people have received for owner-financing and to see if you would share the terms?

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Charles Carillo
Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
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@George Paquette

I have found with seller financing that the owner usually has an important item that they are focusing on; it could be the price, down payment or interest rate. I would feel them out and see what they are most focused on and build the deal around that. 

For example; the price is $300k but talk to them about putting down x% as a down payment and y% for an interest rate and see how they respond. If the property has minimal deferred maintenance; I would shoot for 5%-15% down and a term of 10+ years (see how long they will go) with no pre-payment penalty. If the property needs serious attention; I would try and deduct this amount from the down payment and tell them that you will put a clause in the contract that states the work will be completed within x months.

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  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    @George Paquette

    I have found with seller financing that the owner usually has an important item that they are focusing on; it could be the price, down payment or interest rate. I would feel them out and see what they are most focused on and build the deal around that. 

    For example; the price is $300k but talk to them about putting down x% as a down payment and y% for an interest rate and see how they respond. If the property has minimal deferred maintenance; I would shoot for 5%-15% down and a term of 10+ years (see how long they will go) with no pre-payment penalty. If the property needs serious attention; I would try and deduct this amount from the down payment and tell them that you will put a clause in the contract that states the work will be completed within x months.

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  • Tanner Sherman
    Real Estate Broker · Omaha, NE · Member since 2020 · 329 posts · 203 votes
    4y
    Quote from @George Paquette:

    I am looking at a property to BRRRR for $300k and I threw it out to the owner to owner finance it. She said yes and for what terms? I wanted to get some ideas that people have received for owner-financing and to see if you would share the terms?


     You want to focus on the seller's needs. Seems like she isn't going to just come out and tell you, so you are going to have to do some digging to find out what it is that she really wants. I would suggest putting together a few offers, all with different terms, and present them to her. Her responses will tell you what she really needs. 

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  • Tanner Sherman
    Real Estate Broker · Omaha, NE · Member since 2020 · 329 posts · 203 votes
    4y
    Quote from @Charles Carillo:

    @George Paquette

    I have found with seller financing that the owner usually has an important item that they are focusing on; it could be the price, down payment or interest rate. I would feel them out and see what they are most focused on and build the deal around that. 

    For example; the price is $300k but talk to them about putting down x% as a down payment and y% for an interest rate and see how they respond. If the property has minimal deferred maintenance; I would shoot for 5%-15% down and a term of 10+ years (see how long they will go) with no pre-payment penalty. If the property needs serious attention; I would try and deduct this amount from the down payment and tell them that you will put a clause in the contract that states the work will be completed within x months.


     I agree with this- I wil add that sometimes what is important is external from the deal. ie, "I need enough money to get a storage unit and a plane ticket to fly out to my grandchildren". Maybe you can pay for two years at a storage unit and buy a plane ticket for a whole lot cheaper than your down payment would be. 

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y

    Be conservative in your offer. I've seen people purchase property with 0% down because the seller didn't want to increase their taxable income! I've also seen interest rates that are as low as the banks. It's crazy what some people will accept.

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