Need creative investing advice
4 Replies
Isaiah Moch
from Minot, ND
posted over 3 years ago
Corby Goade
Investor from Boise, ID
replied over 3 years ago
People can give you advice on these forums all day, but it's really about what works for you and what the seller will accept. Typically, owner finance deals come with a down payment and an interest rate that is a bit above market. That said, maybe the seller is interested in unique terms? Why not come up with a scenario that you really like and propose it to the seller and ask for feedback?
Nathan Platter
Real Estate Agent from Minneapolis, MN
replied over 3 years ago
Whichever way you decide, acquiring a residential investment property (non-homestead, 1-4 units) will require 25% equity in today's markets.
Seller Financing works great if you need to build up reserves for that 25% or if you can add value/improvements to the property before obtaining traditional financing.
Most often, sellers who carry the loan want to reduce or delay their taxes for another year, so sell the owner on that benefit.
Ultimately, the seller wants to take the money and go, so be sure to listen to his reasons why they may want to carry the note shorter than you'd prefer.
WOuld love to hear how this deal concludes!
Tracy Z. Rewey
Investor from Orlando, FL
replied over 3 years ago
@Isaiah Moch The beauty of owner financing is you get to determine your own terms and negotiate something that works for both sides. From the perspective of a note investor we prefer to see notes amortizing so the payor (you in this situation) has built up some equity when it comes time to refinance and pay the balloon. This also helps the seller have a note that can be sold or liquidated on the secondary market (if they don't want to wait to get paid off). I also understand the need to preserve cash flow so as @Corby Goade mentioned it's really about what works for you and the seller.
You might also want to consider putting a first right of refusal into the note so that you as the payor have the right to cash out the note at a discount should the seller ever decide to sell the note. I've bought properties with owner financing and was able to pay them off early with other financing and get the seller to give me a discount. Most notes are sold at a discount so you might as well at least have the option to take advantage of it should finances allow at that time.
David Wilson
from San Diego, California
replied over 3 years ago
My experience w seller financing is they want a higher rate than a traditional lender, and they want more income than int only, so you'll need an amortized payment. In exchange, you may be able to get away w less down. They also like to see some principal reduction. In my case, a retiree who wanted monthly income bc interest on CDs was so low. Also for tax reasons. Why would your non- mortgage expenses be almost 1k on a 150k property? Seems high, but maybe I'm missing something.