Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
When it comes to seller finance of a multifamily property, are they typically five year baloon or thirty years. What are the typical interests you have seen?
Meriden, CT · Member since 2018 · 699 posts · 500 votes
3y
With seller financing it is really based on making it a win for the seller. I've seen principal only payments, amoritized loans with balloons, etc. Each seller will want something a little different so be knowledgeable enough to make an offer of what they want that works for you!
Meriden, CT · Member since 2018 · 699 posts · 500 votes
3y
With seller financing it is really based on making it a win for the seller. I've seen principal only payments, amoritized loans with balloons, etc. Each seller will want something a little different so be knowledgeable enough to make an offer of what they want that works for you!
Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
3y
Think about what you would want when selling. If you are being asked to carry some of the risk that the buyer doesn't pay you, then you want upside. That upside might simply be that the property gets sold right now. It might mean that the interest rate is high enough so the promise of money coming in is greater in the mind than the risk. It could also be the possibility of getting payments rather than a lump sum for tax purposes or other.
The wise buyer will attempt to find out which are most interesting for the seller. I tend to present an LOI that has multiple options, either 2 or 3. More is overwhelming. One option is bank-only and will have a lower sale price. Another option will be a sale price at or close to asking with terms that you like. The third option tinkers with the amount that the seller will finance.
Generally, these are short-term loans (up to 5 years) as sellers often want to be done with the property and move on. They often think that seller financing is doing a favor to the buyer, so you'll need to reframe it right away.
For rates, take a look at what your bank is offering. If there will be no bank at all (unusual) then the rate should be lower than the bank, think 75% of the bank's rate or so for your initial offer. If the bank is involved and you just need help with the down payment to make it happen, you might offer a rate 25% higher than the bank. Longer terms might have a higher rate, opposite of what the bank might do, I know.
Let us know how you end up offering and good luck.
Real Estate Agent · Portland, CT · Member since 2019 · 761 posts · 849 votes
3y
Hey James, it all comes down to the needs of the seller. I have seen terms that are just 1 year and terms that are 10 years. To be honest I have not seen a full 30 year seller finance term. When working with the sellers, you need to first listen to what they need vs assume. Based on their needs, you can then frame a seller finance offer that may make sense for them. Regarding interest rates, the recent seller finance deals I have seen have been slightly below market interest rates, but nothing like 3%. Hope that helps!