owner financing...

[Terry Owens]

Can someone please explain this is laymen's terms? This is on an MLS listing for a duplex. The price is 96,000.

Thanks,
Terry

[Carrianne Mucho]

This appears to target someone who really wants to own and has a down payment but cannot qualify for conventional financing?  ie; recent BK, short sale, foreclosure...

5 year balloon means it needs to be paid off or refinanced (through a different lender) before 5 years is up.  So they would need to clear up their credit issues by then or the seller could take back the property.  

In addition to charging 4% interest, they are proposing that the seller gets 60% of the rents until the loan is paid off.  If rent is $1185 minus $711 paid to the seller, remaining gross is $474.  Assuming a 0% vacancy factor, 474 minus P&I payment -$367 minus an estimated -$125 for taxes and insurance = -$18 per month.  Before maintenance, management and vacancy.  Better hope for appreciation!