Investor · San Ramon, CA · Member since 2014 · 36 posts · 8 votes
Hi,
I am looking to sell a property and I am being inquired about Owner/Seller financing. I am wondering what kind of due diligence to perform on buyer before carrying the note.
If there is a forum/blog post on the topic please point me to that.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
10y
The best way to protect yourself is with a sizable down payment that will more than cover any legal costs you might incur if foreclosure is necessary. Beside that you should check everything: income, income stability, credit, references, criminal history, other assets....everything. The higher the down payment the less your risk but if anything troubles you about the buyer you should not proceed with the seller finance terms. You will be living with this buyer for the duration of the agreement and they could be much harder to rid yourself of than a tenant.
That said, I have down seller financing deals without checking much of anything. The buyers I did this with were other investors with a long history in my market, who I have done multiple deals with and with whom I had a personal relationship with. The less I know about the buyer, the more I check and the larger the deposit I require.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
10y
The best way to protect yourself is with a sizable down payment that will more than cover any legal costs you might incur if foreclosure is necessary. Beside that you should check everything: income, income stability, credit, references, criminal history, other assets....everything. The higher the down payment the less your risk but if anything troubles you about the buyer you should not proceed with the seller finance terms. You will be living with this buyer for the duration of the agreement and they could be much harder to rid yourself of than a tenant.
That said, I have down seller financing deals without checking much of anything. The buyers I did this with were other investors with a long history in my market, who I have done multiple deals with and with whom I had a personal relationship with. The less I know about the buyer, the more I check and the larger the deposit I require.
With you having done these in the past, I am hoping to get your opinoin.
In our case, we are 3 partners, great credit, no record, good incomes, own long established businesses in town etc... We have probably 500K or so in equity in the 15 rentals we have combined right now that are worth 1 million plus. We range from 3-12 years experience in investing in rentals. The seller actually use to work for one of us for about 15 years. Strong relationship. We all also have sizeable equity in our personal homes and retirement accounts.
One an approximately 1 million portfolio, would a 10% down be enough for you with a balloon as soon as we reach 20% equity,or would you want to see more than that?
Have you ever done deals where you take a lien on another property(s) as collateral towards a current deal? (3 of the properties we own are owned free and clear).
In this particular owners case, he does not want to 'go back to low CD and Bond rates', but he is around 80 years old so is likely getting a little tired of doing the management too.
I see out unique advantage to him as being the high level of trust in each other and all 3 of us having a solid financial footing.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
10y
@Daniel Dietz, what I would do is irrelevant. I have done several deals for much less than 10% down for buyers I trusted. I am in a position where I don't need the down payment and prefer the monthly payment and/or the kicker on the back end. The question you need to determine is what would work for your seller.
I have funded deals where the current project did not have enough equity to cover my investment where I added a lien to another property the borrower owned to protect myself and give me the confidence I needed to participate in the deal.