Seller financing a duplex

6 Replies

Hello and thanks for stopping by to help!

i have a couple questions and see what everyone thinks! i would also like to have everyone's opinion on how to proceed! 

Okay, here is the deal. i have a someone i am speaking with about a duplex she owns. She wants to still live in the upstairs unit which is 2 bedrooms. Down stairs is 3 bedrooms. The leases are sublets per room at $400 per room. What i was think is offering to do a seller finance deal for 5 years with a balloon payment. i was going to have her live upstairs for free for a year instead of giving her a down payment. She is asking $99,000

Location is Kalamazoo Michigan 

Rents as far as i know total $1600 for the downstairs 

insurance is around $80

Taxes are around $150

payments to her i would assume to be around $800 

Any advice on how i should approach this i appreciate! thank you so much!

i'm sorry you are correct. i was taking into account the bedroom upstairs she has rented. That will not be included. And yes. After the year i would charge the $400 per room upstairs. Ideally i would like to refinance before that year is over. This would be my first deal. So any and all info is welcome. 

Tell me if this is correct? i have confused myself and what i'm think sounds to me like partial subject to and seller financing. 

i let her live for free for 13 months. totaling 10k as a "down payment" i purchase the property at 99k minus the 10k down payment. So it would be financed with her at 89k for the seller financing aspect. Now I pay her the terms we agree upon that would cover her existing mortgage payment. i collect the rents, pay her the mortgage payment and pay for all operating expenses. At the end of the 13 months i would refinance the property for what i owe on the loan. also after refinancing does she get the funds? 

he owes about 47,000 so at refinance she would get around 40k

is this all correct or am i just overly complicating this whole situation?

She's asking 99k, but what are comparables? Also, like someone said above, is it zoned/permitted properly? Have you factored in property management, repairs, etc? Interesting idea on having her live there as down payment, but sounds like you need to get some more information on the property and projected expenses. 

Also you need to agree on expenses you will pay on the upstairs while she is living there. Is it seperately metered? electric, trash, lawn mowing, plowing water? what happens after 1 year? what are the expenses now?

Thank you for responding!

Yes I verified rents in the area and comps. Price is accurate, I could work it down if I used regular financing. We are working on getting into the property with our contractor to look over everything, go over current leases, etc. We need to go over expenses still.

The area is Kalamazoo Michigan and these style of rentals is common. I’m going to review what I’m offering with a lawyer. What I think I’ve landed on is a land contract, with down payment being her free rent and refinancing after 13 months. She would pay her part in utilities as well. If the numbers make sense I think it’s a good deal. I’ll still need to do my due diligence and verify everything. Based on just receiving down stairs rents it still should cash flow. After the refinance and I begin collecting rent on the upstairs unit it would meet the 2% rule id like to see on the property.