Seller financing help??

[James Sullivan]

Ok, I have been reading about seller/owner financing and still I am a little confused. I am in a scenario where the seller owns the property free and clear and would offer me seller financing. Say the seller would sell the property for 60K and asking for 25% down. It is a duplex, needs very minor work, and already being rented for a total of $1,300 a month. We have discussed property taxes, insurance, and the type of tenants that are currently occupying the duplex, but have not discussed the interest rate, terms, etc. I understand each scenario is different, but how would a deal like this be structured? Is the 25% down a out-of-pocket cost? I thought seller financing was supposed to cut the cost down on the front end of purchasing a rental property?

[Allen Maris]

Hi James,

This can go any which way and really depends on what the seller is looking for and what you can negotiate. If it's a lower end priced home, 25% might seem okay.

As far as terms, that's another thing that's negotiable with them. I've found that usually owner terms will be higher than a bank, but (hopefully) less than hard money lender. Usually they will amortize the loan across 30 years but have a balloon note after 3 or 5 or 7 or whatever you guys want.

I currently have a property I'm asking just over 10% down, 6.5% interest, 30 year amortization with a balloon (due) in 5 years.

The biggest plus right now for owner financing is that you're usually saving the pain of getting traditional financing if you don't qualify or just trying to keep another loan off the credit report.

I would suggest a loan servicing company handles the monthly transactions too so there's a middle man and both sides are taken care of.

Allen