How to structure an offer for $650,000 for land

8 Replies

Hello BP Community,

We want to make an offer for a piece of land that the asking price is $650,000.  We want to offer full asking price but request owner financing over a 10 year period offering 1.5% and a balloon payment of $50,000 on the 10th year.  Does anyone know f a calculator online that could compute this?

Thanks in Advance!

Joe Garvin

there are all sorts of on line amortization computers or tools.. just use google to find one.

is that 1.5% interest rate ?  that could be a tough sell.. unless our paying over market up front.

Hi Jay,

Yes, 1.5% is interest and it would be over asking.  The owner from talking with him is more interested in unwinding his estate and creating an income stream for grand kids which is why  we are thinking this may catch his interest.  I found numerous calculators, but none that will allow me to include the balloon payment at the end.

Thanks

We still don’t understand your offer....

Is the 1.5% rate to be interest only paid monthly, or principle payments also, on what amortization schedule....?

What is the $50,000 “balloon”?

If interest only, $10k/yr on $650k isn’t much of an income stream.

The offer is to to pay the loan of $650,000 off in 10 years with a balloon payment  of $50,000 on the 10th year at 1.5% interest over the life of the loan.

In addition to what Wayne said the seller will have to pay imputed interest gain and will make almost or maybe ZERO cash flow if he takes this to an accountant .. or anyone who knows anything about these seller carry backs your going to have push back I suspect unless your paying WAY over market.

I have sold a lot of my OREO over the years with ZERO % owner carry but always set them up short term.. 

30 months 40 months that sort of thing ..

I still don’t understand the purpose of the $50k balloon.....

Are you saying you’ll make monthly P&I payments to pay off $600k on a 10 year amortization instead of $650k, leaving a $50k balance?

With your numbers, borrowing the full amount with a $50k balloon....$5454.48/mo. 

The only thought behind the balloon is a quicker payoff and incentive at the end.  I had a pretty lengthy conversation with owner so this arraignment could meets his needs.   This is not be a personal purchase but rather for the company I work for, so we will also have the cost to build and impact fees and such.