Seller Financing Advice Needed

[Chelsea Wessman]

I'm about as green as it gets and currently running numbers on my first potential deal.  

He's willing to do seller financing and the triplex is worth about 160-165K.  We can only scrape together 5% down currently-hence the initial appeal of seller financing. For the life of me I can't figure out how to make the numbers cash flow with a 3-5 year balloon payment that he casually suggested.  He also mentioned he's looking for an 8% interest rate.   I know he's open to negotiation but at this point my eyes are starting to cross running the numbers over and over again while changing the variables.  No matter what I seem to do I'm in the negative here with such a short loan period and high interest rate.    If anyone is willing to take a look at the info below and suggest any other options I can attempt to negotiate I would be so grateful.

There has got to be a way and I'm just not experienced enough to know what it is!  I still have so much to learn, but I won't ever get anywhere if I don't start taking action. 

Long time tenants are on month to month leases and utilities is currently included with the rent. I'd manage myself. How much should I calculate in for CapEx and repair/maintenance costs here? The roof, furnace, and water heater are all new within the last 5 years.

Apt 1: $675 1 Bed
Apt 2: $800 1 Bed
Apt 3: $550 Studio

Gross Monthly Income: $2025.00

Expenses

RPU: $137.56 14/Mo. avg.
MN Energy: $109.70 14/Mo. avg.
Trash: $80/Mo.
Tax: $221.66/Mo.
Insurance: $125/Mo.
Lawn/Snow/Maintenance: $160/Mo.

[Jason D.]

@Chelsea Wessman so you're confusing amortization schedule, and the term of the loan. The term (how long you make payments) is 3 or 5 or 10 years with a balloon, but the payments could be based on a 30 year mortgage, or amortization schedule. I think the interest rate is a little high, think 6-7% is reasonable for a 3 year balloon. And utilities included in the rent means the owner (you) pay utilities. You need to find out, from the seller, what he/she is looking at for an amortization schedule. I would push for 30 year because that makes your payments lower. And make sure that there is no pre-payment penalty, or just be aware if there is. Hope that helps some! Good luck!