Seller Financing and Questions!!

[Melissa F.]

Hi BP! I am new investor out of Charles Co, MD and I recently sent a letter of intent to a seller who is wanting to sell his home the seller financing route.. It's a three level townhome, needs some fixes nothing major and it's in a terrific area.  He has no note on it and stated he would hold the note for 5 years, and would like to be cashed out at the end of that term. 

My offer was 

$172,400 Offer

$5,000 down

$167,400 balance to hold for the 60 month term

$700.00 a month = $42,000

$125,400 I would need to refinance at the end of the 60 month term.

Does my deal sound fair? I poured over it for weeks and ran the numbers multiple times.

Oh and I already have tenants in place for Aug 2017 to pay $1550 a month.

Cash flow =850 a month starting in 2017 unless I place a tenant before 2017

Please give me your honest opinions!! And I will update if the seller agrees or counters. 

[Chris Mason]

@Melissa F.,

$167,400 amortized over 5 years at 7%, the P&I payment is actually $3306.

$167,400 amortized over 30 years at 7%, with a balloon due in 5 years, the P&I payment is $1,111.

$167,400 interest only at 7%, regardless of when any balloon payment may be due, the interest only payment is $976.50.

I picked 7% out of thin air. Seller might push back and want higher. 

Buy one of these things, an HP-12C, and learn to use it, if you're going to be designing seller financing programs. Or you could find someone like me and pay a 0.5% fee or something, but I think you will find that this little guy below will be cheaper .