I am looking into my first deal in Portland OR, and have found some potential seller financed deals. This is all pretty new to me so I have some questions. The deal I'm looking at is and below are some of my questions. Any help would be greatly appreciated.
Purchase Price: $425,000
5 bed, 2 bath
4% interest only payments amortized over 30 years.
Balloon payment in 10 years.
- Are inspections recommended?
- How many days is a typical seller financed close?
- How do commission splits work if I am an agent and the home is under contract with another agent?
- Do I pay taxes to the seller or do I pay those on my own?
- Are the taxes separate from the monthly 4% payment?
- What tax breaks are available to me?
Hello Megan! Hiring an inspector is mandatory unless you are very experienced. I would always avoid what the seller has to say. Hire an experienced Inspector. The closing date usually varies. It depends on several reasons. The sellers needs, your goals or plan, whether the buyer pays in all cash or is their deal dependent on their financing. It could take two weeks or two months or more. There might be nothing you could do with another Agent if he or she has a solid listing or if the buyer can let them go at any time Each state has it's own realtor laws. Your contract determines tax payment laws but each state could do that differently. In Texas the tax due is paid by the seller and/or prorated to the buyer. In other words if the closing happens on June 30, the seller is charged for 6 months and the buyers pays the other 6 months if December 31st is property tax fiscal year end.
Again the property tax liability is dependent on what the agreement says. It all depends on what you and the seller agreed to and the type of agreement that you two agreed on. It might be what the seller wants. Is he keeping the deed or giving it up. Tax credits and the use of the. Is it designated to be property to be a buy and hold rental or a buy and sale or a fix and flip. They are all taxed differently. The least tax is probably the buy and hold rental. The Quick Flip or The Fix and Flip are usually held less than the others because they are usually sold within 12 months and are taxed as ordinary income and rentals are called passive income and can use depreciation. Depending on your relationship he may like or dislike you making any profit on that deal. You may need to keep that private and discuss any of your commission. It might be half or less. Just about everything is negotiable.
Goo luck to you!
How'd the deal go?
Hello Megan! Tour looking in a good area from what I here in Dallas.the previous writer was pretty much right. All of your questions are negotiable and part of your contract/agreement. All states typically have different agent laws. Is this an investment or personal use? Either way, I think you cannot “use” your license in either case but they need to be aware of your license. I am also concerned about interest only payments unless they are necessary to make the deal work for you and that creates a positive cash flow as an investment.
If it is an investment try to pay principle if you can afford to and still have a positive cash flow. If that is a personal purchase you still need some questions answered so you know what you are getting into or what all you must pay for, either direct or indirect expenses. Is this a lease with a sales option? After those 10 years, how or what determines its value? How would you fully determine its worthiness? How will you determine it’s total worth as a deal without knowing that?
Will it's final worth be determined by national published inflation rate or its ARV average from 3 agents, you not included. It really depends on your investment purpose to answer any tax related questions. The tax treatment is usually different for a business or personal expenses.
Go through all through the typical evaluation and due diligence requirements including a professional inspection and appraisal. Who gets the title at the beginning? Will it be a general warranty deed or a “red flag” one? Good luck to you!