Owner Financing Terms?
Wholesaler · Cocoa Beach, FL · Member since 2023 · 13 posts · 2 votes
How would you set up a owner finance deal in this current market? I'm curious if a seller offered that they would be open to seller financing what terms would make the most sense for both parties, would you go with a short term loan with a balloon or try to negotiate for long term financing? I know that the terms a largely dependent on the the exit strategy but what would you do? I ask because i'm looking to negotiate terms on behalf of the investors in my area, granted that each investor has slightly different parameters, if I can get a general consensus on the topic it would help a lot!
This is kind of a tricky question to give a blanket answer to. The thing that makes seller financing so great is that the terms are negotiable. The terms that I would offer are the terms that make everyone the most happy. Is the seller someone who owns a bunch of properties free and clear and is in their 70s and sick of managing them but wants passive income for the rest of their life? I would negotiate a lower down payment, purchase price, or interest rate (depending on what is important to the buyer) but with no option to sell or refinance for a given period to guarantee the income that the seller wants. Does the buyer want to do 0% down seller financing? Well then the seller might want a higher interest rate or purchase price. Does the seller want their capital returned in a couple years, add a balloon payment. Does the seller want the highest possible sale price and the money right away? Then they shouldn't be doing seller financing! I personally am typically interested in seller financing because I am looking for low money down solutions and my DTI is really high so I would be willing to pay more and with a higher interest rate to get the low money down component but this will really depend on your buyer and seller.
I hope this is helpful! Sorry that there isn't a clear, one size fits all solution
This is kind of a tricky question to give a blanket answer to. The thing that makes seller financing so great is that the terms are negotiable. The terms that I would offer are the terms that make everyone the most happy. Is the seller someone who owns a bunch of properties free and clear and is in their 70s and sick of managing them but wants passive income for the rest of their life? I would negotiate a lower down payment, purchase price, or interest rate (depending on what is important to the buyer) but with no option to sell or refinance for a given period to guarantee the income that the seller wants. Does the buyer want to do 0% down seller financing? Well then the seller might want a higher interest rate or purchase price. Does the seller want their capital returned in a couple years, add a balloon payment. Does the seller want the highest possible sale price and the money right away? Then they shouldn't be doing seller financing! I personally am typically interested in seller financing because I am looking for low money down solutions and my DTI is really high so I would be willing to pay more and with a higher interest rate to get the low money down component but this will really depend on your buyer and seller.
I hope this is helpful! Sorry that there isn't a clear, one size fits all solution
I have some experience with seller finance but am not an expert. I'd recommend at least having a big enough down payment to cover the closing costs. Since obviously the buyer will not want to lose money. 2nd make sure your offer can cover their mortgage payment. I'd start with 0 or no interest and say your open to negotiation to help find a solution for both parties. I think its good to start a dialogue and let them know you want a win/win deal.
This is kind of a tricky question to give a blanket answer to. The thing that makes seller financing so great is that the terms are negotiable. The terms that I would offer are the terms that make everyone the most happy. Is the seller someone who owns a bunch of properties free and clear and is in their 70s and sick of managing them but wants passive income for the rest of their life? I would negotiate a lower down payment, purchase price, or interest rate (depending on what is important to the buyer) but with no option to sell or refinance for a given period to guarantee the income that the seller wants. Does the buyer want to do 0% down seller financing? Well then the seller might want a higher interest rate or purchase price. Does the seller want their capital returned in a couple years, add a balloon payment. Does the seller want the highest possible sale price and the money right away? Then they shouldn't be doing seller financing! I personally am typically interested in seller financing because I am looking for low money down solutions and my DTI is really high so I would be willing to pay more and with a higher interest rate to get the low money down component but this will really depend on your buyer and seller.
I hope this is helpful! Sorry that there isn't a clear, one size fits all solution
Great response Jacob, have you done a Seller finance deal before, I would love to connect and learn more