Seller Carry Financing Downsides

[Alex Folchi]

Looking to purchase my second investment property.  I am likely $10-20k short in the necessary down payment for a deal that recently came to me.  The deal checks all the boxes for me (area I like, area I know I can find renters, small multi family-3 units, near my first purchase, cashflows with all 3 units rented, breaks even if just two are, etc.)  While I am saving quite a bit on a monthly basis, I do not want to wait months until I save the rest because I am worried the deal will sell elsewhere.  Pre-approval is in hand, pending the down payment.

I am considering asking seller to consider Seller Carry Financing as the agent believes it may be an option.  I have obviously never done this before, and I wonder what the draw backs for me as the buyer are?  What should be part of my negotiations tactics with respect to rate, balloon payment timeframe and date, etc.?  Am I able to simply refinance in a few years when the balloon payment is due?  Obviously some risk in rates rising over that time, but that risk seems small to me.  What am I missing?

Buy-and-Hold investor. Credit 780+. Able to save decent amount each month just from W2 job.

[Joseph Firmin]

Hi @Alex Folchi, Ask the seller - doesn't hurt to ask and update the purchase and sale agreement. We typically make 2-3 offers for each deal, always trying to get seller financing if possible - less money out of our pocket. Just ensure that your lender allows for 2nd lien positions - the seller should ask for this as part of agreeing to do the seller financing.