Seller Financed Airbnb

8 Replies

Anyone here have experience doing this and have any insight? Owner is willing to seller finance and am weighing the pros and cons of doing that vs getting an investment loan. Spoke to my lender and I can still do an investment loan at 25% down, but since the owner is willing to carry the note I am wondering if that is a better option. I'm not super familiar with seller financing so I want to have more knowledge before I come to the negotiation table.

I have multiple STRs in the area so I’m confident the numbers make sense

It can be a good option in terms of not affecting your number of conventional loans, or if you are close on numbers for getting approved for financing. I personally don't want to be wrapped up with a seller for years after a closing but I am sure others have more of an argument for seller financing.

It depends on the terms on the seller financing. Is it close to the bank interest rate? How much is the down payment? Is there a balloon payment that will be due?

If it is close to bank financing then I would absolutely take it.

Originally posted by @Pablo Flores :

@John Underwood @Avery Carl

What if I negotiated a 10% down payment with a 5% interest rate and a 7 year balloon payment. Right now the terms on an investment loan I could get are 25% down with 3.25 interest rate.

 Ask them if rhey would be happy with you paying 4 times the interest rate of a saving account and see what they say. You concede too much too soon. Ask how long they would like to finance this and try and get 10 or 15 years. You can always negotiate less, buts it hard to negotiate more time if you've already offered less.

You can negotiate from there.

If you don't feel a little uneasy about your offer then you offering too much.

Originally posted by @Pablo Flores :

@John Underwood That’s amazing advice! What’s the process of applying for conventional financing when the balloon payment is due for a short term rental? Same as if I where to get a loan from the start?

 Yes, its just a refinance.

I bought my first STR with owner financing. I am paying 6% interest only for 2 years. My thought is that my payments are much lower than they would be for a principal and interest repayment, which would give me some leeway with an improved cash flow. I do have to pay the property tax and insurance on my own, since we don't have those costs escrowed, as would take place with a bank loan. He's happy to *not* get principal back, as he didn't want to pay capital gains tax. I've had a really good first year, and would like to find another owner to finance for me. :D