Seller financing: Paying for repairs?
I'm interested in using seller financing as an option when making deals with private sellers. However, how do you build repair costs into the monthly payments you make to the seller? (Or do you finance that separately via a HML, private lender or your own funds?)
@Vonetta BookerIf you were building the repair cost into the seller financing would the seller be doing the repairs? I would not rely on the seller's ability to make the proper repairs and/or their timeline to get it done.
When I have used seller financing to purchase a property that's all I have used it for - just to purchase the property. Once the property is yours, its on you to take care of the repairs with your money or private lender/HML money. Hope this helps!
@Vonetta BookerKeep in mind if using HML for repair funds, they only will take 1st position for the mortgage, so the seller would have to take 2nd, a position most won't do. So using your own funds is best for repairs.
Or more simple, use the HML or a small local bank (talk to the commerical lending department) for purchase + rehab funds all in one deal.
Good luck!
- Tom
Hi Vonetta
Ask for as repair allowance. You can ask for up to 3% of the purchase price.
Let's say the property is 500,000. Ask the seller for 15,00 repair allowance. The key is to get the bank on board and have a plan on how and where you will use these funds. Ask the seller to increase the price to 515,000 and then ask to receive a credit of 15,000 at the closing.
You are going to hear many people say it can't be done. They may be right, but I have done this a couple of times in our deals. You need to have a solid relationship with the bank and educate the seller by letting him know that it does not affect the deal for him at all. The bank should like this because you are going to get money back that you will reinvest into the asset and make the asset more secure for the bank
Good luck
Gino
