How to convince seller with owner financing ?

[Christian Podedworny]

   I am trying to find a strategy that would persuade a multi family home owner to sell thier property through owner financing which would make them say YES!!

In most scenarios sellers want security through a large down payment and a quick term so that they can get thier money but I want to approach them in a way where they will be willing to go forth with the deal.

Let's say we have a deal with these numbers(hypothetical deal ) :

50 unit apartment complex 

$2,000,000 purchase price 

8 % cap 

95% occupancy at current cap rate 

C  class property at a strong rental market area 

In most scenarios the seller would like to see Proof of funds, and a pre approval from a bank to purchase this complex . At the moment I do not have the credit, down payment and connections to secure financing therefore I would structure the purchase this way :

Tell the seller I would like owner financing for a 5 year period but I am willing to pay more than asking price.

Purchase price $2,100,000

10 % down ($210,000) 

5% interest 

5 year term owner financing (balloon after 5 years and than I would secure institutional financing )

30 year amortization 

Would this entice a seller and would they be willing to go through with owner financing ?

How many of you have tried this approach to secure owner financing and has it worked ?

[Corina Eufinger]

I don't feel this approach would work to entice someone to seller financing.  When an owner contemplates the terms he/she isn't looking much further than the first 3 payments, so offering more for a total price might not be as big of an enticement as you think.  

Don't underestimate the liability the owner is incurring. From his perspective there is the possibility you pay for 3 months, let the place go to #$%^, default, and now he has an even worse situation than just your defaulted payments.  Unoccupied units (or non-paying tenants), deferred repairs, etc. 

I know you said you lack the money for a down payment and can't secure bank financing (which I sympathize with).  Focus your offer more on things like the down payment, and monthly payment that the owner can expect.  Offer them some means of making sure their property is being kept up  and properly maintained (semi-annual inspection where financing owner is present, monthly reports of cash flow, monthly bank stmts, etc). Acknowledge the large risk they are taking on and offer to ease their fears with it by any means you possibly can. 

[Ben Garrison]

You can try talking about the tax angle. What do you know about the Seller so far? Own it outright?

[Mark A.]

Seller may be more comfortable if you keep them on as property manager / keep the current property manager. If the complex is currently being well run, they may have more faith in your offer if you kept the current management team in place.

[Casey Mericle]

 Have you considered taking the management angle?   Why don't you offer to manage the place for free in return for a sandwich lease option?  Your management fee would count towards the purchase price.  This allows you to try it before you buy it. If you don't like the deal then it's just an option so you can walk away