Seller financing help??

[James Sullivan]

I think I may have posted this earlier in the wrong location.. Sorry

Ok, I have been reading about seller/owner financing and still I am a little confused. I am in a scenario where the seller owns the property free and clear and would offer me seller financing. Say the seller would sell the property for 60K and asking for 25% down. It is a duplex, needs very minor work, and already being rented for a total of $1,300 a month. We have discussed property taxes, insurance, and the type of tenants that are currently occupying the duplex, but have not discussed the interest rate, terms, etc. I understand each scenario is different, but how would a deal like this be structured? Is the 25% down a out-of-pocket cost? I thought seller financing was supposed to cut the cost down on the front end of purchasing a rental property?

[Dave Savage]

In this scenario everything is negotiable. Most likely the seller will be looking for you to make an offer. A lot of times I like to make 2-3 offers. In this case you may offer:

60k with 10% down over 10 years at 5% interest or $573 a month.

or you could offer

70k with 0 down amortized over 20 years with a 5 year balloon at 5% or $462 a month.

An infinite way of structuring the deals, but if you offer more money for the property with 0 down (if that is one of your priorities) you might find a willing seller. Make sure you look at your cash flow for any deal including a vacancy rate, repairs, property management, etc.

This isn't a perfect scenario if you overpay for the property as you are going to limit your exit strategies - and you need to make sure you have a repair fund in place before purchasing.

Overall you need to determine what a compelling offer might be for the seller and make the pitch and then be ready to negotiate. The more you do it the more comfortable you'll get.