BiggerPockets, I need help drafting an Owner Financing Proposal...never done it before.
Details: I have the opportunity to purchase 3 Condos in a nice complex for $105,000 total from the same owner. They agreed to owner financing along with a credit check; they want to know my terms?
My questions to you:
1. Recommended down payment? Should it be a percentage?
2. What is the going interest rate (understand it is negotiable but is it usually above conventional rate or below?)
3. Average loan term for owner financing?
4. What else should I be thinking about?
Is this offer too off?
1. $10,500 down payment (10%)
2. 5% interest rate
3. 20 year amortization schedule with option to pay it off sooner
That NETs me $364/month in positive cash flow which I'm good with (ROI = 44%)
Thanks in advance for any assistance or deals that you've done. Was thinking, should I submit two offers; higher asking price with lower interest vs lower asking price with higher interest?
@Christopher G. Yes, those terms sound OK. I would be surprised they're agreeing to hold the note for 20 years. I usually see 20 year amortization but with a 5 year balloon.
Other item to think about: get it appraised to make sure you're not overpaying. It also answers the other question, no I wouldn't pay more than appraisal.
Your profile says Germany but assuming you're in the U.S. or the properties are?
@Tom S. thanks for the heads up on the balloon, I included that in my proposal. Yes, I live in Germany now but am trying to do long distance investing. Closing on a house next week, somehow my realtor forget to tell me that the heat pump was missing...