Sellers financing deal strcture

6 Replies

How do I approach a seller with good sellers financing approach on 20 acre ranch? Has anyone done in a deal like that? 100k down 5% interest for 5 years and then refi?? I know the owner well so I just don't want to discourage him. Any thoughts? Property in Merced county not that it matters.

Thank you

If you know the seller well, you should have a discussion around the seller's needs.  How much cash would he/she like to see right now?  What tax impact would a 5 year deal? a 3 year deal?  Keep in mind that, done correctly, seller financing has benefits for both parties.  Find out what the seller wants and do the deal as close to that as you reasonably can.

@Narinder Gill

To tag on to what Darius said, consult a tax person (maybe together) to see what impact is has on the seller. If the ranch is owner occupied, then the 2 in 5 rule applies to them. You could then structure the seller's finance as a 30/3 loan. That gives you 30 year terms w/3 years in which to refi. It would allow the seller to claim sec 121 tax exemption 3 years later when the balance is paid.

Main point being consult a tax professional before proceeding.



I went to school in that area and remember well the fog. I would put together a business plan showing the expected almond yield, income and expenses, to assure him you know the business and will be able to pay him back and then some. Also state the equipment you have and how you plan to harvest them, etc.  That would make me a lot more comfortable about lending...