0% Interest Owner Financing Offers

[Dustin M.]

Hi Guys,

Had a quick question that I hope someone can answer. I found a duplex worth around $75,000 (ARV) that might make a good rental property. Rents are $400 and $600. The place needs around $5000 in repairs. The owners are trying to sell the place for $70,000

I was thinking of making a all cash offer of $35,000 and see where it goes from there.

However, I was thinking I might have a better chance of getting the offer accepted if I make a 0% interest owner financed offer at (or near) their full asking price. Does anyone have a formula that they use to compare their owner financed offers with their all cash offers? I'm not exactly sure how long the 0% interest loan should be so it is somewhat equivalent to the all cash offer.

I tried using the N, I, PMT, FV calculations that Lonnie Scruggs uses in his mobile home books for sale (they are great by the way buy them). However, I'm not sure if this is the right way to go about doing this.

If anyone has a formula they want to share that helps in this conversion between all cash / owner financing offers I would appreciate it.

Thanks,

[Richard Warren]

There is a flaw with your 0% strategy. The IRS assumes a minimum interest rate on transactions such as this even if you don’t charge or pay any interest. It’s called imputed interest and you will be taxed as if you charged it.

Check this article: http://yourfinishrichplan.com/blog/2009/07/16/irs-imputed-interest-rate-and-rules-tax-preparation-help-tax-debt-help/

:cool: