All Forum Posts by: Patrick Goswitz

I'm happy you are at least asking the question. As a seller, financing can make you a lot more money, but gives you risk. You also need to be discussing the terms of your contract. You really need to have a term on your loan that is less than 30 years. You can use 30 year amortization, but most seller financing is a way for a buyer to get more time to find better financing.

What you are giving up is basically an option for the buyer to get a better deal sometime down the road. That's a huge thing you are giving up (and maybe worth the additional price of 315k over 260k to you). Most seller financing has a 2-5 year term in my experience, though it can be whatever you agree upon. You should have something in the promissory note about a prepayment penalty.

Still, there must be some other issue going on here. This buyer should be able to get a better deal from a bank. The only thing I'm coming up with is that he doesn't have the creditworthiness to get a bank loan. Or the place is not livable right now, in which case he can't get an FHA loan, but that doesn't matter, because he has 100k to put down. His inability to get bank financing is a red flag to me.

ROI - I don't mind your use of AI, just use it as a supplemental tool to your other tools. More importantly, you can't rely on ROI when going out that long. That monthly 1.3k payment will be worth a third of that in today's dollars when you get 30 years down the road. That's another HUGE reason to have a shorter term. Every year, you are giving this guy more money in the current deal.

Finally, since you will be acting like a bank, then you also need to vet this guy - credit checks and references and background checks.

I know the reason he is not going to the bank. I have ran credit checks/ background checks and we have a very close mutual friend. I agree with you about how he needs to get refinanced in 3-5 years so I can cash out.

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Quote from @Carini Rochester:

Crunch your own numbers with the equations that mean something to you. That way you'll have information that is meaningful to you so you can judge for yourself if it a good deal for you. Don't ChatGPT it. My impression is that this is a good deal for the seller, a bad deal for the buyer.

I agree. I crunched my numbers as well, If he puts down a 100k, I now have 135k technically tied up. If he is making monthly payments of ($1,394.49x12)/135k= 12.39% cap rate. That is how I look at it. Which kind goes with @Randy Rodenhouse IRR number

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Quote from @Randy Rodenhouse:

Please do not use GPT chat for something like this. You need to get a proper calculator and learn how to use it.

With that being said, I did a quick calculation and your return on capital invested will be around 12% (IRR). Now this number will change if the person pays off early, etc. This also assumes as you get the $100k down (which you will probably not get on a $300k house) and the person pays the loan consistently. Typically seeing around 10% down is more reasonable, which would be around $30,000 which would give you a return of around 7.25% on capital invested.

If you sell houses with owner financing, you need to shorten the term to maybe 10-20 years. This will help your returns a little.

I would like to shorten the term as well but that will raise his monthly payments which he is wanting to keep below $1,400. I have the option as well to adjust the interest rate up in 5 years but not down.

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Quote from @Nathan M kiefer:

Who would want to do this deal that has 100k, no one with a brain in there head.

Hahaha he has his reasons. Not my problem haha. He wants the house badly and he wants to keep his monthly payments below $1,400 which I am able to do for him.

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I was thinking about owner financing a property to a buyer and I need some help to figure out if this is a good deal or not.
I paid $235,000 for the home. Here would be the terms with the buyer:

Sales Price: $315,000 (NOT worth this. Probably worth about 260k)
Down payment: $100,000
Interest rate: 6.75% (option to raise rate in 3 years but not down)
Loan Term: 30 years
Buyers monthly payments: $1,394.49

When I crunch this into Chat GPT is says I am getting a 271.87% ROI. Which over 30 years is about 9%.
It then gives me an annualized ROI CAGR of only 3.1%??? Which sounds horrible. Is this a good or bad deal to you?

2 Votes

He has the proof of funds and I know why he is not going to get a conventional loan.

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I was thinking about owner financing a property to a buyer and I need some help please to figure out if this is a good deal or not.
I paid $235,000 for the home. Here would be the terms with the buyer:

Sales Price: $315,000 (NOT worth this. Probably worth about 260k)
Down payment: $100,000
Interest rate: 6.75% (option to raise rate in 3 years but not down)
Loan Term: 30 years
Buyers monthly payments: $1,394.49

When I crunch this into Chat GPT is says I am getting a 271.87% ROI. Which over 30 years is about 9% (at least I thought)
It then gives me an annualized ROI CAGR of only 3.1%??? Which sounds horrible.

Please let me know your honest thoughts!!!

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Investment. Yes but she did warn me verbally I may have to evict this person.

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I am closing on a house and family member of the owner is living there, who has no lease, or should be in the house once I close. I have a feeling that person is not going to leave. Do I have to turn on the utilities once I buy the home? I don't see why I would for the squatter but I want to make sure they don't have some way of coming after me in court.

Also what is a good security system people use for flips?

1 Vote

Quote from @Ray Hage:

Quote from @Patrick Goswitz:

Only .15 acres. This actually ended up turning into a good deal...hopefully. I am doing an owner finance at 10.75% on an 10 yr note and the buyer is putting 60k down for a purchase price of 125k. Of course, hasn't closed yet but no more contingencies.

I would have probably kept it (assuming the holding costs were low) but this is a huge win as well!

The holding costs are really bad. Foremost is charging me $350/ month on the insurance!

0 Votes

Knoxville, Tennessee

All Forum Posts by: Patrick Goswitz

Patrick Goswitz has started 10 posts and replied 34 times.

Post: good or bad deal?

Post: good or bad deal?

Post: good or bad deal?

Post: good or bad deal?

Post: good or bad deal?

Post: Owner Finance Deal. Good or Bad?

Post: Owner Finance Deal. Good or Bad?

Post: Squatters | Utilities | Security System

Post: Squatters | Utilities | Security System

Post: My heart hurts. BAD INVESTMENT