What success have people had with 100% Seller Financing?

Passaic, NJ · Member since 2017 · 65 posts · 42 votes

Hi Bigger Pockets, I was wondering if anyone had success with completely seller financed deals. What locations? What were the terms for the financing? How did it affect the purchase price? What was your experience throughout? Did you refinance into a conventional loan? Thank you!!

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Jeff Groudan

Investor · Fort Collins, CO · Member since 2018 · 37 posts · 27 votes

We've generally seen downpayments between $10K-$20K for properties below $300 in value.

The less downpayment you pay, the higher the monthly payments are unless you can negotiate down the interest rate. However, if I am a seller and I am letting you in for no downpayment, I won't have much flexibility left on terms!

We did buy one property for 0% down - the relevant info on the seller motivation was he had a hard property to sell, it needed a lot of work and not much traffic. He was also stuck on his sales price

We hooked him by offering him his full asking price but in return, asked for 0% down and showed him how over the term of 5yrs, he made much more by offering financing then he would get by taking just a cash offer. We gave him a cash offer, but well below asking to "contrast" it with our seller financed offer.

It won't always work but look for properties which have been on the market a long time without reductions - that is often a signal that the seller is stuck on a price...

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Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
this is a unicorn.....
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
@Matt K. back in the deep dark days of 09 2010 I sold a good portion of my OREO inventory
Zero down Zero % interest on 5 to 7 year notes.. with those terms I had 100% pay rates no defaults.
but that ship has sailed.. I may have a few more coming up..
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Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Originally posted by @Jay Hinrichs:

@Matt K. back in the deep dark days of 09 2010 I sold a good portion of my OREO inventory
Zero down Zero % interest on 5 to 7 year notes.. with those terms I had 100% pay rates no defaults.
but that ship has sailed.. I may have a few more coming up..
Few coming up you say... can I get these as no doc loans lol
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Matt K.:

Originally posted by @Jay Hinrichs:
@Matt K. back in the deep dark days of 09 2010 I sold a good portion of my OREO inventory
Zero down Zero % interest on 5 to 7 year notes.. with those terms I had 100% pay rates no defaults.
but that ship has sailed.. I may have a few more coming up..
Few coming up you say... can I get these as no doc loans lol
we do no doc every day of the week.. a million a month of those.. anytime you want one.
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Elliot Vann
OP
Passaic, NJ · Member since 2017 · 65 posts · 42 votes
8y
I see... Even with a significantly higher purchase price and interest rate?
0 Reply
Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Originally posted by @Elliot Vann:

I see...
Even with a significantly higher purchase price and interest rate?
Most times, bank or otherwise, someone wants you to be invested and have skin in the game. This wasn't always the case but when people walked away from loans it changed.
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Elliot Vann
OP
Passaic, NJ · Member since 2017 · 65 posts · 42 votes
8y
Yes, but all that would happen is the seller would be back to square one plus all the profit he made on the loan and principal. Am I wrong?
0 Reply
Elliot Vann
OP
Passaic, NJ · Member since 2017 · 65 posts · 42 votes
8y
Also, I have the management experience and knowledge to successfully manage the property.
0 Reply
Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Originally posted by @Elliot Vann:

Yes, but all that would happen is the seller would be back to square one plus all the profit he made on the loan and principal. Am I wrong?
not if the value of the property tanked
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Elliot Vann
OP
Passaic, NJ · Member since 2017 · 65 posts · 42 votes
8y
Well do you see 90% financed as realistic?
0 Reply
Eric Jacobs
Specialist · Fort Lauderdale, FL · Member since 2016 · 187 posts · 128 votes
8y
No. There is cost in getting the property back from you but more to the point there is nothing in it for the seller unless a rare situation like the one described by @Jay Hinrichs. Sounds like a more viable option for this sort of a situation would be a lease option. If you aren’t willing to invest something in the property, I think it unlikely a seller would be willing to undertake the risk of investing in you.Oh and @Jay Hinrichs depending on where those properties are, I’d be happy to take a look :)
0 Reply
Jeff Groudan
Investor · Fort Collins, CO · Member since 2018 · 37 posts · 27 votes
8y
We've generally seen downpayments between $10K-$20K for properties below $300 in value.
The less downpayment you pay, the higher the monthly payments are unless you can negotiate down the interest rate. However, if I am a seller and I am letting you in for no downpayment, I won't have much flexibility left on terms!
We did buy one property for 0% down - the relevant info on the seller motivation was he had a hard property to sell, it needed a lot of work and not much traffic. He was also stuck on his sales price
We hooked him by offering him his full asking price but in return, asked for 0% down and showed him how over the term of 5yrs, he made much more by offering financing then he would get by taking just a cash offer. We gave him a cash offer, but well below asking to "contrast" it with our seller financed offer.
It won't always work but look for properties which have been on the market a long time without reductions - that is often a signal that the seller is stuck on a price...
3 Reply
Elliot Vann
OP
Passaic, NJ · Member since 2017 · 65 posts · 42 votes
8y
Jeff Groudan Thank you! Can you go into a bit more detail on the terms you had? What was the rate and monthly payments like? And over only 5 years?
0 Reply
Jeff Groudan
Investor · Fort Collins, CO · Member since 2018 · 37 posts · 27 votes
8y
this was two years ago so I doubt we could get this rate again:
- 5.5% Interest
- 30yr amortization
- 5yr balloon
0 Reply
Mike Flora
Investor · Menifee, CA · Member since 2015 · 534 posts · 216 votes
8y
ARV 350K at time of purchase Purchase price was 292,500.00 25K down 1% interest on the remaining balance after each payment. $1,100.00 comes off principal every month and that never changes. 4 year balloon payment Rents for $1,800 a month Had to put 10K into repairs to get it to rent condition. ARV now worth 390K Got 2.5 years left till loan due I have done some flips with a year note and principal only payments as well to beat out my competition. Just find the motivated sellers and tinker with terms, down payments etc etc
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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
8y
You’d have an easier time finding Bigfoot than a seller offering a land contract / seller finance on a decent property with zero down . The horse and buggy days are over
0 Reply
Brandon Johnson
Investor · Baton Rouge, LA · Member since 2014 · 280 posts · 219 votes
8y
@Elliot Vann I just updated a post similar to your question. ANYTHING you can dream up is possible and I never listen to negativity like that coming from Dennis M. Be clear in your intentions, put on paper exactly what you want and follow your inner guidance when people and circumstances are put before you because if you are clear in your intentions you will find anything and everything you are looking for.
https://www.biggerpockets.com/forums/50-creative-real-estate-financing/topics/188852-how-to-structure-my-creative-finance-to-purchase-a-duplex?page=1#p3573532
Let us know how your deal works out!
1 Reply
Alan Grobmeier
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
8y
I did a Owc 3 years ago. 20% down, 5.25% interest rate, 30 yr amortization, balloon in 5yrs.
A Unicorn. I overpaid by $10-$15k to do the deal. I refi’d it when I went ‘portfolio’. I’m up $80k and it’s cashflowing nicely.
0% down is rarer than Bigfoot in today’s market, especially if there is a realtor involved. He/she has to be paid somehow. If it is truly 0 down, the price and terms have to be inflated.
0 Reply
Elliot Vann
OP
Passaic, NJ · Member since 2017 · 65 posts · 42 votes
8y
Thank you!
0 Reply
Brandon Johnson
Investor · Baton Rouge, LA · Member since 2014 · 280 posts · 219 votes
8y
When so many people have "Unicorn" stories to share, is it really so unlikely for you to find what you want @Elliot Vann? Nah, you can find your 100% seller financed deal, or better yet it can find you. You can find it without a realtor, you can find it with a realtor, you can structure it where the future rents pay your realtor commissions and you can find an attorney who will write that into your contract. My attorney has done things more creative than that. He had a BUYER (investor) agree to pay both agent's cell phone bills for the following 12 months just to keep the deal from falling apart since there was no room in the deal for commissions anymore.
I get a kick when folks say, "I did it, but it's so rare you probably won't find the same opportunity." ANYTHING is possible!
1 Reply
Elliot Vann
OP
Passaic, NJ · Member since 2017 · 65 posts · 42 votes
8y
Yes I agree! People want 100% seller financing to walk up to them and say “here’s a present!” I believe it is possible and it might take a lot of work to find but a deal is a deal for both sides! And to the right person 100% financing will be a perfect opportunity to defer capital gains and collect income even if for the buyer it may be at a higher purchase price and higher rate. But hey that’s why they call it creative financing!
0 Reply
Daniel DietzPro Member
Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
8y
The only one I have done so far was 5 years ago. I am in contruction and worked a lot with a guy that did about 6-10 flips a year, and he knew I wanted to do one too.
He had two of his for sale, working on two more. He bid on 3 more at the sheriff's auction hoping to line up one in the hopper. He got all three! Therefore he had too much to do at once. So he 'resold' one to me. ARV was 140K, he bought for 75K, sold to me for 85K and carried the whole amount for one year @ 6% interest. Interest only with balloon at 1 year.
We knew each other and truested each other. He borrowed his funds from Private Lenders @ 3% so made a 3% spread for a year of doing nothing and 10K on the 'wholesale'. Win win situation for everyone.
Dan Dietz
[email protected]608-524-4899
1 Reply
Brandon Johnson
Investor · Baton Rouge, LA · Member since 2014 · 280 posts · 219 votes
8y
@Elliot Vann see there you go! It's all about attracting the right people and being ready when the opportunity comes a knockin'.

I bet BP is full of people who would tell you that you aren't going to find private money as cheap as 3%, but here is a guy who found folks happy to make 3% on their money. Anything is possible.
I bet if @Daniel Dietz approached his flipper friend and asked if he could keep his eyes out for another similar opportunity, they could do it again.
1 Reply
Josh Crockett
Newport, RI · Member since 2018 · 24 posts · 8 votes
8y
Good Evening All,
I'm very new to the idea of seller financing and something keeps coming up that I don't understand. Can you explain how to create a balloon and refinance "strategy" for seller finance? I've seen 1-5+ year "balloons" and only know that at that point the interest rate is supposed to rise to current levels right? I am also in the middle of a potential SF deal where they have asked me for terms. $207K requested price, $2025 in rent and that's all I have to go off of, yet they have asked me what terms I want to offer (I'm working on finding out why they want to sell and starting to lay down a personal approach to their situation). I appreciate the help in advance!
Josh
0 Reply
Chris Szepessy
Catskill, NY · Member since 2018 · 636 posts · 668 votes
8y
My first rental was seller financed with 0 down no interest. The house was next door to me. I had found the owner's number through online records and called them to complain about the tenants. He told me they were evicting them and offered me seller financing with nothing down and no interest over the phone. I met the owner's a few days later at the house. We introduced ourselves, shook hands and he said they want $125K (it was worth about $150k) at $1000/month. After 20 minutes of looking around and talking, he hands me the keys and says "I'll be in touch." My wife and I look at each other and I say "well, I guess we bought another house." lol
Two years later he offered us another house with the same terms. I'm assuming my story is a "unicorn" but it can happen. I have thought about refinancing into a conventional loan to get more cash flow, but I'd rather have them paid off earlier and I feel the previous owner did us a favor and I don't want them to have a big tax bill which is why I assume they offered seller financing in the first place.
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