Seeking feedback on offer strategy for Seller-Financing deal

[Rod Mendoza]

I am looking to add to my portfolio and have identified a person who owns two properties, free and clear. They’re both rentals (occupied) and in poor shape. The owner is older, very busy and has other projects on the table. Owner also has had a rough time with tenants as of late. 

Identifying these opportunities as potential motivators for the owner to want to get rid of both properties, I am looking to put a scenario together in which I would percent present an offer to the owner to help them get rid of their rental-related issues to the owner while growing my portfolio. 

I have been gorging on BP and Pace Morby content, so I have a (shaky 😅) grasp on the gist of my approach: Asking/confirming with seller what the problems are, offering a solution that includes a fair offer on the properties, the elimination of their tenant headaches, a reliable monthly payment, and avoiding expenses such as realtor’s commission and house inspection expenses. I will add the insurance of a Performance Deed built into the contract for a full “Seller’s win”.

In exchange for that problem-solving offer I will ask for “terms” such as seller financing, low interest rate, and low (or no) down payment. The only other fact to consider is that both properties would need some renovation funding in order to bring them up to the standards of my other rentals.

I am looking for observations on this approach, ideas to make it better and constructive criticism to enhance the chances of this deal going through!

Thank you all, Rod. 

[James Alderman]

Sounds like you've considered a lot here. I have one seller-financed deal that is very similar to yours. Older triplex in disrepair and a seller who wanted out. A main sticking point for him was the length of the seller financing, considering his age and health. We talked about balloon payments, but we settled on the following:

$0 down, but it has needed about $30k in repairs over the first year

20 years

2.5% interest for the first five years, and increasing by 2.5% every five years