Offering Seller Financing

7 Replies

There is a triplex in my neighborhood that I would love to grab. It's being rezoned so the possibility to build two more units on the lot would be possible in the near future. I reached out to the seller (or the seller's agent) and inquired about how open they'd be to seller financing. They asked what would be my terms. I was just wondering if you had any experience with seller financing and how can I make this offer as attractive as possible without using too much of my capital? It would be my plan to BRRR. The units are underpriced and could use some updating.

Originally posted by @Brian Camey :

There is a triplex in my neighborhood that I would love to grab. It's being rezoned so the possibility to build two more units on the lot would be possible in the near future. I reached out to the seller (or the seller's agent) and inquired about how open they'd be to seller financing. They asked what would be my terms. I was just wondering if you had any experience with seller financing and how can I make this offer as attractive as possible without using too much of my capital? It would be my plan to BRRR. The units are underpriced and could use some updating.



@Brian Camey -    In my opinion, having an agent relay to the buyer that you want to try seller financing usually doesn't work. At least it has never worked for me. The reason is because the agent wont know what it is or if they do, they will explain it badly. They will talk to the seller and give them something like "Yeah so he wants to know if he can just make payments out to you?" . Seller financing is like a white buffalo to a lot of agents. Especially the bad ones have no idea what it even is. 

Your best strategy if you are truly interested in the triplex is to call the agent up, tell her you are very interested, and ask to get on a 3-way call with the agent and the seller. So now you are basically going direct to the seller. Then explain to him why you would like to structure the deal that way. And I would say to also have financing available to you so you can give him 2 options. 

So......Hey seller, I can buy your house for $200k if I go with financing from a bank, or I could do $220k if you would be willing to carry the note for me. Making interest along the way.

Good luck!


Happy Housing,

Matt

 

I am an agent and have done deals like this before- I can tell you that if a buyer wanted me to do a three-way call with the seller, there is no chance on this planet that I would allow that, for a multitude of reasons. 

In my experience- the best way for a buyer to negotiate OWC is to focus on monthly cash flow for the seller- forget the specifics of the terms, it usually hurts you as the buyer and it can easily confuse the process for the seller. 

Keep it as simple as you can; "I will pay you $XXX every single month for $XXX years." If they want more detail, you can talk about balloon payments, maybe even offer them a prepayment penalty. The simpler the better- once you start getting in to interest rates, amortization schedules, etc- sellers can get overwhelmed quickly.

Best of luck!

@Brian Camey there has to be a reason for the seller to seller finance. That reason is usually they can get a higher price seller financing than they can on the open market. If you are willing to overpay, they may go for it. Worst case scenario for them is you default and they get the home back and keep whatever you have paid into it.

As far as building goes...  That's an expensive endeavor.  There are not a ton of builders building small multi families in my market, its too expensive.  Yours may be different.  From what I have seen new builds are large commercial and mixed use buildings, large apartment buildings and single family builds. 

I agree strongly with Brian. You can speak to the agent first and explain the strategy so they heel you are showing them respect. There are many reasons a seller would prefer to finance it such as avoiding capital gains and having a guaranteed monthly check that will not fluctuate like to stock market does. I have been a broker and investor for 35 years. If I can not speak directly to the seller and tell them the advantages of owner financing, I am wasting my time writing up the offer.

You're not licensed, you mail a letter or call the seller directly!! Use skip tracing, beenverified or I find better luck with premium.whitepages.com .   The tax assessor will have the mailing address since this is a rental..  

Why think inside a small box of what is std?  your down payment will need to cover the agents commission plus pocket change for the seller and as above;  stick to just what monthly payments would be, frame as like a social security check coming in each month.  You can mention the profit they'll get in interest payemtns often is 30% +/- of the sale price all said and done which you can frame as "profit" for the seller offering financing.

@Brian Camey

No reason to BRRR out of it if you get good financing unless the seller wants a balloon. As far as acquisition side, it's definitely hard to get seller financing on a listed property unless it's been sitting a while. Just make sure whatever happens you pay the agent and don't take money out of his/her pocket!

@Brian Camey let's say property is worth 150 now on market, ARV is 200 conservatively. You tell the seller it needs 50 in work but you can actually get it done for 30. Give them options. Say they can either have 110k in cash now, 125k if I give you 10% down, pay you 4% annual interest(double what bank will give you in savings account) only paid out monthly, balloon in 2 years(promise to cash you out) or 150k with 0% down 4% interest amortized over 30 years. Chances are the seller will pick option 2 and everybody wins. He gets more than a cash offer, can delay big tax bill, gets decent interest, you get to avoid expensive hard money, have more cash in your pocket to complete rehab, and have plenty of time to turn the place over and get it refinanced before you need to cash him out