All Forum Posts by: Jackson Mertes

Many older sellers in my experience also would rather have payments over the years because that's how they are used to funding their retirement. Also, you can tell them they are earning interest on their equity and are not taking on much risk because they would get the property back to sell outright if you default on the note. I've bought 3 properties with seller financing, all older sellers and the first one actually brought it up himself. Just build rapport with them first. 

The less down payment they take upfront, the less capital gains taxes they have to pay. So, if they don't need the money, no money down and higher payments might work even though they have to pay tax on the monthly payments as well. It should be a property that they have no interest in managing anymore and they also don't need cash or don't want to figure out how to 1031 into another property. They can just take payments right away and pay very little without a large downpayment.

 Rather than taking 1 large capital gain in a single tax year they can spread that gain out over multiple years by utilizing seller financing and become "the bank" by collecting interest payments on their own property on which they can foreclose if the buyer stops making the payments, hence becoming the bank. Feel free to reach out if you want to discuss further or have a specific situation you would like to talk about.

Spreading out capital gains taxes

Everyone would like to start with seller financing so that's not novel. If you like it because you think you don't need to be vetted and you need less money down and it's easy, start over. If you like seller financing because you like the idea of explaining the tax savings to old owners who are going to pay large capital gains on their investment properties, learn that and then build lists with 100 percent equity and absentee-owned for 20 years and go to work.

Hey Jackson,

I was in a similar position to you about 6 months ago. I don't know what your resources look like, but I can tell you what I did... I built up enough funds from my job for a down payment. This was around 30-40k for a 2-3% down payment. I used an FHA Loan to finance a duplex in the St. Louis Park Area. The duplex was not perfect, but I painted, carpeted(home depot), and repaired multiple areas of the side I planned to move into. It's a 3 bed 1 bath on each side and the other side is mostly up to date with tenants that were already under lease. I made sure to get an inspection. I was most afraid of buying a property with major structural or foundational issues that would sink me financially.

This property was actually an off market property to begin with that would not pass city inspection when we first saw it (at least on the side I am living in). Now I am confident that it would be close to passing inspection. Most of the issues with this property were cosmetic, and I am still working to make things look more presentable for when I move out. 

The property does not cash flow at the moment, so I will likely have to pocket maintenance and repairs. mortgage is about $3000 a month. However, with inflation moving like it has been, In 5-10 years I'm sure this will be a good long term investment and cash flowing property as long as it is properly maintained.

I think if I do another investment, I might try something out of state. I want to try to buy a house that was flipped and failed to sell with cash of my own. I will then rent it out, get a cash out refinance, and repeat to accrue cash flowing properties that require minimal work. That's a whole other topic of conversation. 

Needless to say, I hope you find something that you are looking for and have as much success as you can with your first property.

cheers,

Jacob

Not sure since I've handed this off to property management from day 1, but all the luck if you end up trying it!