How do I properly and legally do an owner finance buy?

Question

My childhood best friend’s parents are selling their house and I am wanting to do a buy and hold rental with it but finance it with owner finance.

I have never done an own finance before and would love some feedback from people who have done them and the pros and cons.

Jonathan R McLaughlin · Answer

not sure if you are asking about negotiating the deal or structuring it. For structuring it, draft a promissory note with a lawyers input and review and MAKE them take it to their lawyer. Be explicit about how the payments are made/where and who oversees (there are companies that do this) If they don't have one, tell them to get one. These are close family friends so you want to be uber transparent.

For negotiating, aim for a deal where you are both lucky, assuming they are willing to do this. Put down as much downpayment as you can afford and an interest rate that allows you to do well and that they will find attractive. Ballparking but maybe 6% amortized over 20-30 years. Be flexible Decide on the length of the balloon and if there are prepayment penalties. Do you plan to refi out? When? Print out the amortization schedule. Document cost of replacement insurance. You are personally guaranteeing the loan, are you a decent credit risk? Make sure they know your score.

I'm not sure where you are in this process....if a lot of the above is new or doesn't make sense DONT DO THIS you will damage a long relationship

How do I properly and legally do an owner finance buy?

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