FSBO and Generating a Note and Calculating the Numbers?
I have a property that I am looking to sell but I am looking at possibly doing seller financed in order to get a quick sale.
ARV-135-145K
Cost-100K
Downpayment 10-15%
So if I flip it as such I could profit quickly and be done with it. Or I could take a 15% down and offer it up at higher financing for blue collar applicants. This would allow for a steady cash flow that will be passive vs. renting it. I am looking for constant cash flow so is this reasonable or should I just flip and sell. How is the proper ROI calculated?
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@Jared Matson Whether you should flip and sell or sell with financing is entirely up to you, your business model, your market, and your financial goals. My current business model is to liquidate and move on to the next deal because I've got plenty of opportunities readily available. For you, this might be a profitable niche and there are lots of investors that do very well with the seller finance method.
I'd caution against the idea of using seller financing to make it easier to sell, followed by selling the note so that you can re-capitalize quicker. Most note buyers will expect a discount on your note, which will eat into your profits. Use seller financing to hold the note to increase your profits, not sell the note to lower your profits.
IRR would be the best way to calculate your ROI. How long do you estimate the project will last? If you think 3 years or more, I'd use "IRR" in excel. If it's 3 years or less or you don't mind the extra inputs and want more accurate numbers, use "XIRR."