Things to Consider when buying with Seller Financing

[Mike Lowery]

Fellow BPers, 

I am in the pursuit of a potential portfolio deal. I would be purchasing three duplexes and possibly a SFR using seller financing. Aside from terms, which I intend to negotiate, I am wonder other things I should consider doing to make sure this investment is worth my while. I intend on order appraisals and inspections. 5 of the 7 units are rented and I have requested a copy of the lease documentation to understand what the current tenants expected from the previous landlord. Aside from the two vacancies, one was supposed to be rented out as of 10/1, there is a lease that is coming due on 12/1. These properties are located in Milwaukee, Wisconsin in a C neighborhood and finding a renter in the late-fall, early-winter months could be difficult. I would imagine I should also probably run a title search and make sure there are no outstanding liens on the properties. Anything else you guys can think of? I have already performed my cash flow analysis and intend on walking inside and outside of the properties in the next 10 days.

Thanks in advance!

[Chris Mason]

• Title insurance. Get it. It's completely normal for a title company about to issue a title insurance policy to discover something during their due diligence, that you didn't see when you pulled a title report for the exact same property from the exact same title company. 
• Exit plan. Appraisers are normally the eyes and ears of lenders. In this case, you are picking the appraiser(s). I'd ask him (/her/them) to appraise it as if he was being the eyes and ears of an FHA lender, because those standards are a little bit higher than fannie/freddie, and include health/safety issues. These appraisals should reveal both an opinion of value, and let you know ahead of time if you will have issues selling and/or refinancing them.