Seller Financing Strategy Suggestions/Feedback
Hey BP,
I am looking for an opinion on my potential strategy to get started in REI.
This strategy would include a direct mail campaign where I would target property owners with 100% equity in residential multi-family properties (6+ bedrooms total). I would offer the motivated owner to consider seller-financing to avoid capital gains tax, realtor commission fees, closing costs and gain a passive income with an amortized 5-8% interest on the principal amount. To take account for the concern of not selling and getting all cashback, I would offer contract termination option where the lender(seller) can null the contract with a 6-month notice, however, all principal must be paid back and/or additional 2-5% convenience fee based on the original principal amount (Work in progress).
What do y'all think I am missing here?
My only concern is the legality of the contract and the small market of potential property owners. I need a professional to review this. However, I believe this strategy will work well for a person looking to sell but wants to escape the deadly costs of selling a property. The contract even includes an exit strategy for them if they need the cash soon.
Any feedback would be awesome!
Most Popular Reply
@Conn G. Good strategy overall. A points to add as I've bought a fair number of seller financed purchases.
You can easily find quite a few deals just on Craigslist using those search terms. Make sure you evaluate the deal independent of the seller financing. I've seen a fair amount of crappy properties with bad tenants and the seller is using the "seller financing offered" angle to get rid of a problem property.
I wouldn't offer 8% as that's roughly double bank rates. Maybe 6%. I typically offer a 5 or 7 year balloon as most sellers are unwilling or unable (too old) to wait 30 years for all their money.
Hope that helps and good luck!
- Tom