Seller Financing Advice

[Bryce Rodgers]

Hey guys,

There is a property in my neighborhood that has been sitting vacant for about six months after the older couple there moved out. The house is outdated but very well kept. The property is worth more than I can afford to put much money down on (money tied up in another deal right now) so I’m trying to get creative and come up with a seller financing deal that would be appealing to the grown kids who own the home now, but stay out of the red. I’ve never done a seller financed deal so I wanted to get some advice on doing one. Anyone have any good advice/do’s and don’ts?

2 beds, 1 bath

1,563 sqft

Zestimate: $230k (wouldn’t pay that)

Rent potential: $1,200/month

[Joshua Parr]

It really comes down to what they want and work a deal off of that. First, you have to find out if they are even open to a seller finance. If they are set on price, then give them their price and you get the terms. 

Here's an example: They may be asking 200k. Give them that in payments of $555. That's 30 year mortgage with 0 down and 0 interest. If they want the money sooner than 30 years, let's say 5 years, then do a balloon payment after 5. In that 5 years, you'll have paid down the property $555 x 60 months which is $33,333. A tenant should be paying that though. And after the 5 years, you should be able to refinance or sell it for a profit. Maybe do a lease option with tenant. In the meantime you're collecting rent of $1,200 minus mortgage of $555. So $645. I don't know what taxes are but you should still be cash flowing positive with insurance and reserves for maintenance. 

Now that's just an example. They may want interest or a down payment or whatever. So the main thing is finding out what they want and figuring out something that works for both of you. If you can't agree, on to the next deal and continue to follow up because they may change their mind a few months down the road. The great thing about owner finance is that there are a wide range of terms that can make sense and you can get creative. I would just assure them that whatever you agree upon, you will have an attorney draft everything up so it's legit. That always gives people peace of mind.

Best of luck!