Seller Financing Proposal

8 Replies

Hi All! I’m new to Rehabbing and trying to get creative with finding deals and funding them with OPM that are worth the cost of funds. I’m about to make a proposal for Owner Financing but I’m not sure that I have all my bases covered. Please share any tips or advice that you might have!

Deal Basics:

Purchase Price: $150,000

ARV: $310,000

Rehab estimate: $80,000

I’m thinking to offer the Seller $75k down payment, and he finances the other $75k, interest only for 6 months. Standard P&I payments after 6 months, with a balloon at 18 months (so he can get out).

I plan to get Hard Money for the $75k down payment and $80k rehab costs and estimate the project to take 6 months to finish & sell.

I’d be all-in for about $245-250k after 6 months holding costs. My backup would be to refi & rent if needed as this is in a desirable part of town.

Are there any gaping holes in this idea? Anything I need to consider?

Thanks and I appreciate the feedback!

Why are you spending $75k DP?  Did the Seller ask for that?  If the Seller hasn't asked for anything yet, why are you negotiating for the Seller and against yourself? 

What is your exit strategy?

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Good point @Joe Villeneuve.  The seller still has ~$70k left on a mortgage so I was thinking to pay that off to avoid any "Due on sale" risk.  So you're suggesting to start by asking him to finance 100% of the property?

My exit strategy is to sell once rehab is complete, or refi with a conventional mortgage & rent if needed.  

@David Turner As others mentioned, just use HML for the full amount, much cleaner that way. You should also look to local banks or credit unions in your area to see if they could provide purchase + rehab financing, especially if you plan to keep the place. Much less expensive and no need to refi. Ask for the commercial lending department.

- Tom