Owner financing for seller who wants to stay in their house

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I am in talks with an off market seller that wants to sell the property, but would like to be able to stay in the house. It is an older gentleman that is not wanting to have to deal with the repairs, maintenance and upkeep. When we first met he mentioned finding a senior apartment to rent, but after further discussion he has stated that he would really like to be able to stay in the house and rent it back from me after I buy it. 

I am not opposed to this if I can structure a deal that is truly a win-win, but I do not want to have to lock up a bunch of cash on this property. I would need about 20% down to buy it as a rental property if using a typical mortgage. I'd rather not have to tie up that money, so was thinking I might be able to negotiate an owner finance scenario. But, I have never done so where the seller wanted to stay in the property. Has anyone done this and if so, how did you structure it?

@Braden Smith that sounds like a win win already you have a renter and a property. There are alot of way you could go about it and i would present him with atleast 3 scenarios. 1. You can get a low interest rate financing scenario from him where he pays market rents and you dont have to put much money down for what ever term you two negotiate. 2. Give him a discount on rent in exchange for no interest on the down payment or a lower down payment (hopefully none) you put down for the property. 3. If he is not willing to budge at all on the other 2 maybe offer him some type of cash incentive once a year for no down payment along with discounted rent. I hope some of this made sense because with seller financing its all about what makes the seller feel comfortable. The main point you have to get across to him is that he will be living in better conditions then he is now i see that you mentioned it needs repairs. 

Originally posted by @Braden Smith :

I am in talks with an off market seller that wants to sell the property, but would like to be able to stay in the house. It is an older gentleman that is not wanting to have to deal with the repairs, maintenance and upkeep. When we first met he mentioned finding a senior apartment to rent, but after further discussion he has stated that he would really like to be able to stay in the house and rent it back from me after I buy it. 

I am not opposed to this if I can structure a deal that is truly a win-win, but I do not want to have to lock up a bunch of cash on this property. I would need about 20% down to buy it as a rental property if using a typical mortgage. I'd rather not have to tie up that money, so was thinking I might be able to negotiate an owner finance scenario. But, I have never done so where the seller wanted to stay in the property. Has anyone done this and if so, how did you structure it?

 No good deed goes unpunished. Lawyer up, you will eventually need one. It is not a good idea to allow a former owner stay in a house they have sold. 

Seriously, talk to a lawyer before you commit.

@Braden Smith : You should make it clear as day that the owner sold you the property he's your renter. If it makes sense, get conventional financing. The downside with a deal like this is when you have to evict the owner. If you got owner finance, when you evict him, he could try to call the loan. He might fail but it will create a lot of headache for you. People don't reason well when they are upset. If you went down this route, do get council to help you craft some statement for both side to declare everything you discuss.

Good luck!

Vi

I did several of these back in the 09’s. But I usually just got a conventional loan. Having their signed lease ahead of time helped with qualifying though. Also no vacancies or make ready costs. 

@Braden Smith, There was a real estate investor in WA State, Joe Kaiser, who routinely bought the homes of people facing property tax foreclosure and let the owner's stay in them.  He published a fascinating blog of his interactions with the sellers which may have helpful ideas regarding structuring sales where the seller stays in their home.  Be aware that the Joe Kaiser blog is primarily his response to being sued by the WA State AG for alleged violations of Consumer Protection laws. His blog is, 

http://www.pushedtoshove.com/

Joe Kaiser has always maintained that the State had not received any consumer complaints about him.  He claimed that seller's who worked with him faired better than they would have if he had not stepped in to save their property from tax foreclosure.  Joe claims the real impetus behind the AG's lawsuit was that multiple WA counties where losing hundreds of thousands each year in overages because his company was removing many properties from pending tax foreclosure.