Creative Financing For Colleague Seller Home Purchase.
Suggestions?
Have a colleague who’s relocating. He knows I have a rental and came to me with an off market opportunity to buy his 1 year old town home. Good location. Market value, maybe just slightly under it since we aren’t using realtor.
He has to leave to start new job. Wife is staying back until January. they either want to sell then, or sell now, and she’ll rent it from me during interim.
They’re open to creative financing. They don’t have a ton of equity. Maybe 40k or so. I don’t have enough capitol for a traditional 20-25% down on a traditional lending option. I can do a portion of that and was thinking of amatorizing the rest to them over an agreed upon rate.
Any ideas how anyone would structure this?
Sure thing. You’re gonna want to get clear on whether you’re doing a true owner finance deal (one in which you’d get the deed) or something like a contract for deed or a lease purchase (in this case, you wouldn’t get the deed yet). Then from there you gotta come to an agreement with the seller on the following: Purchase Price, Down Payment, Term or Length of note, Interest Rate and then come up with the monthly payment. Is there gonna be a prepayment penalty or a balloon? That needs to be clear as well. How will the yearly/monthly taxes and insurance be handled or escrowed?
If there’s an existing mortgage on the property then you’d be looking at doing a wrap of sorts and you’d be in second position. Getting the seller on board should be interesting. I’m guessing they may not want to deed the property over to ya? It’d probably be safer for them to avoid the due on sale clause and it’s less risk for them overall anyway… As long as you’re cool with it then maybe see what you can structure.
It might be helpful to find another investor in your town who has experience with this and then seek them or their escrow closer or attorney out. They might be able to assist.