Owner finance question

[Jonathan Toruno]

So was wondering If i could BRRRR a owner financed home? Or is that dependent on the written agreement? I have a home that needs a lot of repairs but is willing to owner finance. Also found a local real estate entrepreneur who will finance the rehab. But my plan is to brrrr it tho am I wrong?

[Daren H.]

It depends on the seller financing you have negotiated and the deal you have worked out with your rehab financer. Keep in mind, all seller financing is not the same. I will give you an example. I just bought two houses from the same seller. One the seller owned free and clear. I bought the house on a straight installment sale. I gave the seller three options. He chose the middle offer. I basically I came up with a price I can pay, divided it by 180 months and said here is the monthly payment and total. No interest loan for 15 years. Every payment goes toward paying down the loan balance. The house is in good shape with a 5 year tenant. In this case, I don't need to BRRRR. The loan payment was derived where I need it to be so I can have a cash flowing rental and getting full equity with every payment I make. The second house, I purchased "subject to" the seller's existing financing because he had a loan on the property. I didn't like the loan long term because I knew I had options to do better than 6.5%. As a result, I gave the seller 3 options. He chose the middle option again. I take the property subject to for 8 months vs many years, but I take a significant discount on the purchase price. I will refinance the loan at 6 months and slap 30 year fixed rate financing at ~4.5%, freeing up ~$200 month. Not to mention, the tenant is about ~$200 under market rents. There are other misc details I didn't go into but you get the point hopefully. One seller financing deal has no real urgency or benefit to BRRRR, the other has a need to BRRRR. It just depends :)