Seller Financing - how to structure a deal?

[Nick Mazzarese]

Hello BP,

can you someone provide an example for how they would go about structuring a seller financing deal on a free & clear property?  

[Bill Gulley]

Equity is not created by buying at a "discount",  market value is what it is and you report that value until the following year talking to a lender.

Nick, is this for you to buy an investment property or to live in? If you are to live in it, interest only loans are predatory, so are any short balloon requirements.

Investment properties may be seen as commercial loans, not everywhere, but a commercial note can be interest only with a balloon in a few years. If it is commercial and all you will be doing is renting it out, then selling it, interest only might work. Make sure the property is in good condition and marketable.

Keeping a property and refinancing an interest only note in three or five years can backfire as you probably can't get rents high enough in that period to force appreciation at 125% of your purchase price, roughly as your future loan will require 25% +/- of equity to refinance it.

Do not over pay for a property to obtain seller financing, financing doesn't add value to the property and that puts you further behind in trying to obtain equity to refinance.

Good luck :)