Advice to set up Seller Financed deal

4 Replies

Hey guys,

I have a property lined up that seems to be a pretty good option for seller financing. The owner owns the property outright. It is a 4 unit apartment building, all four 1bd/1ba. Anyways, the reason I got interested in this deal is because it looked neglected and had a for rent sign in the front. So i called the guy and asked if he was invested in selling and he told me anything is for sale for the right price. 

I just don't know where to start with setting up a seller financing deal. I know that first i need to figure out how much he charges for rent but it was tough getting any real numbers out of him. He's running the place like a mom and pop shop. One of the units he is renting out as a studio, as a favor to one of the long term tenants. Then two other units are empty, one needing work to get to rent quality. I know there is opportunity for big value add here seeing as this place is located right across the street from a big university. The owner is old timer kind of guy and I can tell he is starting to get burned out. So i need some advice on how to handle this and create an opportunity for a good seller financing deal.

Any advice would be great!

Well it takes a really long time to talk about negotiating with Sellers, but I basically build rapport with the seller first, I might take 15 minutes,  and then I talk about a cash offer and terms offer 

With Old geezers,  if The property is free of mortgages,  I tell him 

you can make a lot more money if youre the bank and you creates a private mortgage

I tell him 

the banks of been making money forever and the IRS let you do this

So whatever the ARV is I usually give them a little bit more on installment sale price and get my payment well under the monthly rents, it's all about can flow

Search Brian Gibbons installment sale and you get a lot of information on it 

This is only for free and clear properties

If there's a loan or  existing financing its a different conversation

@Steve Vaughan has great insights too

Thanks for the mention @Brian Gibbons !  You have far many more and far better creative ideas than I!

In my area to get ARV or something close to a pencil out price, I try to be about 96 times current rents. That would be 96 X 3 for you, but that's for my area. You may be in 2% land and are only paying 50x rent.

The bad news?  Every 'seller' that has told me everything's for sale 'at a price' has been unrealistic with said price and tough to work with.  Hope your guy is different, @Qendrim Marku !

Question for anyone that can chime in on this type of property. I know when talking about cap rates and such that usually applies to commercial apartments and someone would only pay based upon the NOI currently. Since this is a 4plex would the same rule apply ? Because if i understand the OP correctly one unit is under priced and two units are vacant and the other is a mystery. So would the current vacancy dictate the price to be based on what its currently bringing in ?

Originally posted by @Qendrim Marku :

Hey guys,

I have a property lined up that seems to be a pretty good option for seller financing. The owner owns the property outright. It is a 4 unit apartment building, all four 1bd/1ba. Anyways, the reason I got interested in this deal is because it looked neglected and had a for rent sign in the front. So i called the guy and asked if he was invested in selling and he told me anything is for sale for the right price. 

I just don't know where to start with setting up a seller financing deal. I know that first i need to figure out how much he charges for rent but it was tough getting any real numbers out of him. He's running the place like a mom and pop shop. One of the units he is renting out as a studio, as a favor to one of the long term tenants. Then two other units are empty, one needing work to get to rent quality. I know there is opportunity for big value add here seeing as this place is located right across the street from a big university. The owner is old timer kind of guy and I can tell he is starting to get burned out. So i need some advice on how to handle this and create an opportunity for a good seller financing deal.

Any advice would be great!

 Here's a few issues I see with this - The units are most likely being used for student housing which is why they may be in rough shape. With student housing you ARE going to have a ton of things to repair as they will be damaged by students (assuming you were to rent to students). Additionally insurance for student apartments is significantly higher due to above reasons. But most importantly each unit is only a 1/1, which is going to limit the rental market. Of course you would have to judge what you eventually find the rent rates to be and compare to what the market rate is to figure out if there is room for expandability.

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