Trying to Understand Owner Financing Terms Structure

6 Replies

Hello Bigger Pockets,

I have been putting potential offers in front of sellers for properties and through the webinars I have seen here I am trying to give options to choose from instead of only one item. Hoping the seller will think more in terms of which one and not yes or no. That said, I would love to hear any coaching from people regarding a typical owner finance option that could be offered. I understand that answer could vary drastically, but if there was any guidance to be given, I am all ears!

For reference, the property types are small multifamily properties (2-4 units/ea).

Thank you in advance for your time. 

A few approaches to consider for owner financing, @Tyler Geisler :

Present 3 options, 1) Cash offer well below asking, 2) Conventional financing a bit below asking, 3) Owner financing at or slightly above asking with good terms.

An offer well above asking (20%+) with low-or-no money down and 0% owner financing. A number of benefits for both of you, especially if the owner likes mailbox money, doesn't want to do a 1031, and/or is in a higher marginal tax bracket.

@Tyler Geisler I go with 10 - 20% down, 5% interest amortized over 30 years, and a 5 or 7 year balloon. I shoot for slightly below asking price.

I respectfully disagree with the above post to pay 20% over asking and 0% or no money down. The issue there if suddenly something happens (divorce, market correction, etc) and you have to sell or refi, you're way in the hole and can be foreclosed on.  No one expects that of course, but I did survive the 2008 correction and that was a tough one!  Quite the learning experience.

- Tom