What terms have you seen with seller financing?

Question

Currently looking at a duplex (owned free and clear) and the owner is open to seller financing. Listed for $146,000, rents at 1,840/month.

I am wondering what kind of terms people have received on seller financed deals? Is there any sort of standard when it comes to seller financing?

I know this is sort of a loaded question as the seller and buyer can almost agree on anything...but I would like to hear what other investors have seen on seller financed deals.

Thanks!

Tom S. · Answer

@Kyle Soderman Most of the deals I've done in the past were 10-20% down, 5-7% interest rate, 30 year amort and a 5 year balloon. Generally they were properties that needed a fair amount of repairs so the property wouldn't qualify for conventional financing.

Hope that helps,

- Tom

Hope that helps,

- Tom

Steve Kontos · Answer

@Kyle Soderman

Agreed and whatever you do, don't give the seller too many options because that'll also deter him.

Steve Kontos · Answer

@Kyle Soderman

Funny I just answered a similar question in a different discussion.  Find out why they are selling and then you can better structure offering them a Seller Financing option.  It's tough to tell you what type of Seller Financing to do because we do not know their reason for selling.  I have done deals where the seller financed some of the down payment and others where the seller holds a note for a certain amount.  It really varies.  If you want to ask them why their selling and let me know what they said, I can give you a more precise answer if that helps?

Tom S. · Answer

@Kyle Soderman  Good to hear Kyle.  Make sure also you get it appraised.  Unlike a bank that always requires an appraisal, sellers usually do not. You just want to make sure you're not overpaying.  Finally use a good attorney that's familiar with seller financing.

Good luck and let us know how it goes!

- Tom

Kyle Soderman · Answer

@Steve Kontos I don't believe so. I am thinking we would end up doing a balloon payment.

Steve Kontos · Answer

@Kyle Soderman

The question becomes does the seller want to be held on the ropes for 20-30 years?

Kyle Soderman · Answer

@Steve Kontos I got off the phone with the seller a bit ago and sounds like he is open to different options. I brought up doing some sort of structure with a balloon payment. We are planning on sitting down next week to discuss more in depth after we are both able to do some more research.

My thoughts are doing something like this. $15,000 Down, 4.5-6% interest amortized over 20-30 years. With a 5-7year balloon.

I am estimating $841 in expenses (not including principal and interest) all other expenses included.

The reason for selling is really to become more passive and not have to deal with tenants.

What terms have you seen with seller financing?

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