Investor · Central Arkansas · Member since 2020 · 7 posts · 1 vote
I saw a duplex on the MLS for a pretty good price listed by the owner himself. I reached out immediately after doing my calculations. He got back to me this morning. I told him I was interested in the duplex, and would take at asking price if everything looked good after I got my contractor/inspector to walk through. He wants to talk this week. I want to negotiate owner financing with him. What would be the best way to approach this with him? This would be the best option for me financially. Thanks
Rental Property Investor · Toledo, OH · Member since 2018 · 309 posts · 264 votes
5y
Van, I've offered on deals asking for seller financing as well, make sure you come in with a strong offer and know what you're offering. Are you offering seller financing for 2 years at 5% with a balloon at the end, are you looking to pay off the entire property in 10 years at 4%, are you asking them to hold the note for 30 years? Just make sure you have your offer figured out down to specifics so you can answer their questions and make them feel comfortable loaning to you.
Rental Property Investor · Toledo, OH · Member since 2018 · 309 posts · 264 votes
5y
Van, I've offered on deals asking for seller financing as well, make sure you come in with a strong offer and know what you're offering. Are you offering seller financing for 2 years at 5% with a balloon at the end, are you looking to pay off the entire property in 10 years at 4%, are you asking them to hold the note for 30 years? Just make sure you have your offer figured out down to specifics so you can answer their questions and make them feel comfortable loaning to you.
Investor · Central Arkansas · Member since 2020 · 7 posts · 1 vote
5y
@Landon Bleau
Thanks for the response Landon. That was the plan. I was going to lay out multiple options for him. In your experience, what have you found owners to like the best out of your offers?
Rental Property Investor · Toledo, OH · Member since 2018 · 309 posts · 264 votes
5y
I've never had one even consider anything longer than 5 year, typically between 2 and 5 year balloons with an interest rate that is higher than commercial, 4.5%+. I typically put in an offer near what they want for it, sometimes over what they're asking. Seller finance deals rarely are home run deals, but you're able to get into a property that you otherwise wouldn't be able to get, so as long as it's a base hit, it'll be worth it.
Rental Property Investor · Jacksonville, FL · Member since 2021 · 42 posts · 23 votes
5y
@Van Johnson
Hi, I just used seller financing to close on my Duplex about a month ago. It was an off market property and I paid full asking, which was considerably under market price. Purchase price was $105k. I put 20% cash down, I paid all closing, with 8% interest and a 2 year balloon. Monthly P&I payment is $615 on a 20 year amortization schedule. I’ve already finished one unit and have it rented. I’ll have the other done in a month or so. Once both are rented I’ll refinance and pay the seller well before the balloon is called.
Those are the terms of mine, and I was beyond thrilled with the deal we snagged. Seller financing really interests me and I see the value in it. I had looked at a few more properties prior to this one that the sellers were willing to finance. All varied in terms, amount down, balloon period etc. but the properties just didn’t work and the numbers didn’t pan out.
New to Real Estate · Member since 2021 · 18 posts · 10 votes
5y
A lot of great suggestions here. One thing that was mentioned on the BP Podcast or the Real Estate Rookie Podcast (I forget) within financing details is be sure to discuss penalties of paying the balloon prior to the payoff period. I'm forgetting the logic of why the seller wouldn't want the balloon earlier right now, but the hosts suggested making sure there is no penalty for paying off the balloon at any point vs. at the end, this way you're not locked in. I would frame it as telling the seller hey I may get your balloon earlier than the agreed upon rate, would it be a problem for me to get your money back sooner than that?