All Forum Posts by: Andrew Syrios

You're never going to be 3% financing and if it cash flows, I would lean toward keeping it. Remember, if you sell it, you'll have capital gains that you will have to pay since you are buying the other property before you sell you're old house. Even if you have a higher return in the stock market, you'd be doing it with a lower basis after tax and it will take a long while to recoup from that. 

And that also doesn't include principal paydown or appreciation. 

 I've had the same experience actually. It definitely tends to be older sellers who are interested in seller financing and I think you're exactly right on the psychology behind it.

 All things being equal it's usually not good for the owner unless of course it's a way to get the property sold. If it's to a strong borrower and they just want to invest their proceeds, then its fine. But even then, seller financing is rarely substantially better than another investment they could make (including trust deed lending, which will often be at a higher rate than seller financing)

Cash flow is basically the cherry on top for real estate investors. You really don't get rich off it. The important part about cash flow is that you stay solvent; bring in enough to pay your bills and a little extra for a rainy day. Unless you're not using debt, you're not going to be able to live off your cash flow, at least for a loooonnnngggggg time.

The key for real estate investment is building equity; through built-in equity by buying right, appreciation and principal paydown. That's how you get rich in real estate.

 The biggest problem I see with seller financing is the cost of repairs (as well as holding, selling, etc.) Some new investors think of it as a no-money down deal and given those other costs, it really almost never is. So yes, it's definitely something you need to be careful with. 

Welcome to BiggerPockets Erica and best of luck investing!

It's definitely a good tool in the toolbox for any investor but I generally find them to not be useful. First off, many sellers don't have sufficient equity to offer seller financing. And even if they do, they have to be fairly motivated to be willing to do so (even if you've built rapport and all that good stuff).

If they are motivated, usually that means the property needs work and they almost certainly won't lend over and above what you buy the property for. So you'll need to bring your own money to do that. And they'll want you to pay off the loan pretty soon (and usually will you as the rate will probably be higher than banks) so there's that too.

For this reason, we definitely prefer private lenders as they will (if you've built trust with them) often lend on the rehab too. But of coruse, getting private lenders isn't exactly easy. So there are definitely times when owner financing makes sense. 

Welcome aboard Tyler and good luck investing!

Welcome to BiggerPockets (and KC investing) Tamara and best of luck!

Welcome to BP Anthony and best of luck investing!