22k House with Owner Finance Offer

14 Replies

I just wanted to share an offer I had from a seller. The total sales price is $22,000 which is a fair deal for this small town in northeast Texas. Down payment is $2,200 with payments of $348.45 for 10 years. I assume the payment includes PITI but I have not heard back from my last email on that subject.

The house is and older 2/1 that has some deferred maintenance but could be ready to rent quickly.  Rents for a two bedroom is this town range from $450 on the low end to $600 on the high side.  This house looks like a $500 house unless you allow pets which would get you to $550 - $600.

Here is the link to the craigslist posting.    http://texoma.craigslist.org/reo/4799066649.html

I'm not "chopping at the bit" to get this deal but I wanted to see what others thought.

@Dwight Crocker   Personally for me that is not enough income for the buy and hold. Have you thought about flipping it?

Originally posted by @Michael Barbari :

@Dwight Crocker  Personally for me that is not enough income for the buy and hold. Have you thought about flipping it?

Sort of...

I've thought about getting the house and putting a renter in it, then painting the exterior and landscaping to give it some curb appeal.   After it looks better I can put it back on the market in the late Spring and see if I get any takers.  If nothing else I could just keep renting it or do a lease option.

@Dwight Crocker  That picture is from the summer. Have you seen the house recently and know the current condition?  

Personally, I don't think the financing is good enough for a successful buy and hold. I might take it if I could get a 15 year note on it from my portfolio lender. I'd pay about $4,400 down and payments would be like $140 bucks for P&I. Then it would cash flow ok.

a better deal might be to offer $15,000 cash and quick close. Then a $600 rent would be 4% per month. Paid off in two years. Sweet.

@Dwight Crocker  

Realistically that is about what it is worth.  A quick search shows another one on the street for $30,000 that has been for sale for 235 days.  Just not any upside in that part of the state right now.  I have done a few flips in that part of the state and even though I felt like I stole the property, it always took much longer to turn and the profit was always less than anticipated

Negotiate further with the owner...what do you have to lose.  That payment is high even if it does include taxes and insurance. For instance, on a 10 year note at 10% interest on $19,800 owner carry note, P/I would be $261.66 per month. Don't negotiate payment, negotiate terms. I always start at 5% down, and 5% interest for not less than 7 years...if the seller doesn't like it, the ball is in their court and they can counter. 

Maybe I missed something but it was not clear if the that payment included Taxes and insurance.  

If T&I are not included in the payment you are being charged @ 17.5% interest.  

At 8% you would have a mortgage payment of $240.23.  Buy it for that and resell with owner financing (Make sure your note does not include a due on sale clause) charge your buyer 5k down and 9.99% interest (Plus T&I) for 120 months and enjoy the $2,800 downpayment spread an $90 a month with no investment of yours.

Sell it for 35k and 10 years and your monthly check jumps to $156.06

or sell it for 35k and 15 years and you get @ $81.97 a month for 10 years then $322.20 for the last 5 years.

@Dwight Crocker  @Guy Gimenez  (or anyone else):

I was kind of thinking the same thing about the monthly payments being high. How did you guys come up with that number? 

Or even better yet, if I want practice analyzing deals how do I work back those numbers to know more?

@Richard Adjou   I always have my handy dandy Calculated Industries Qualifier Plus IIIx calculator nearby. Super easy to use and durable as a tank. 

Originally posted by @Bob E. :

Maybe I missed something but it was not clear if the that payment included Taxes and insurance.  

If T&I are not included in the payment you are being charged @ 17.5% interest.  

At 8% you would have a mortgage payment of $240.23.  Buy it for that and resell with owner financing (Make sure your note does not include a due on sale clause) charge your buyer 5k down and 9.99% interest (Plus T&I) for 120 months and enjoy the $2,800 downpayment spread an $90 a month with no investment of yours.

Sell it for 35k and 10 years and your monthly check jumps to $156.06

or sell it for 35k and 15 years and you get @ $81.97 a month for 10 years then $322.20 for the last 5 years.

The payment includes PITI. I'm inclined to agree with your approach on this. If the seller will make a few concessions I might like this deal better.

@Guy Gimenez  thanks for the tip! I found the app for my phone but I've never used one of these calculators so I'm playing around with some of the functions now

Did you end up pursuing this deal?

I ended up buying a different rental closer to home.

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