I'm about to begin negotiations with an off-market seller of a property I would like to BRRRR. Because there is a good tenant in place, the current owner stated they would like to keep them around, plus I believe this would likely save me a lot of money vs. using hard money for my "bridge" financing, I would like to have a seller carry option to offer in negotiations ready to go.
As an investor, how do you structure seller financing? What's best case scenario for the investor? Where do you start negotiations and how do you step things closer gradually to an acceptance on their end? How do you sell it to the seller as a good option they should go with ?
I am confused on if this financing is amortized like a conventional loan, or do you make it interest-only with a balloon? What's a common term and rate in today's market?
Investor · Dallas TX, United States · Member since 2014 · 1k+ posts · 1k+ votes
5y
The amortization is WHATEVER you and the seller agree to. Stop thinking in conventional banking terms, it does not apply. My favorite offer to a seller is that I will pay them X per month over Y month at zero interest. You will be amazed how often sellers dont ask for interest. Dont you dare offer it up front. The key to any creative finance deal is that you ask the seller what they want, ask them what they plan to do with the money, and then customize your offer to fit their wants and needs. Talking to a seller is an interview, you NEED to understand what they want, and why they want it. I have bought houses with no money down and the first payment due in 8 months, because my seller wanted to take a summer vacation with the money. I pay them once a year, every summer.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
5y
@Ryan Monty the post above is spot on. If you can imagine it, then you can make it happen. How about a 100 year loan? Zero interest? No payments? I've seen it happen. When interest is being negotiated I will commonly offer 6% with monthly payments or 8% with no monthly payments. So most of my loans have no payments required. And you can certainly adjust those interest rates as well. Make sure you get with a title company (or a fellow investor) to help you draft the documents the proper way but the sky is the limit here.
@Josh Caldwell , @Andrew Postell - hah. I don't why I thought seller's would be expecting something specific. How many people have even ever been in the position to sell a home and were offered the possibility of financing it themselves? Obviously very few people. I have to get past my limiting beliefs here
I would love to read more on the concept of actually having the talks with the seller and solving their problems, if you all have any good blog or book recommendations there. And here I thought you just go in with a set of numbers and hit the seller over the head with it!
Great advice on using the title company to help out. I really wasn't sure who would be the correct folks to help me with the paperwork part....