First time investor thinking about a seller-financed purchase

[Connor Wentling]

Hello!

I am very new to the BiggerPockets community but have been blown away by the knowledge and willingness to pass it around!

I have wanted to get going with investing in buy and hold rentals for years and decided that I'm going to give it an honest attempt this year! My goal is to purchase three houses this year. I have a two-bedroom - two-bath residential property under contract. I've been going through the process of getting a conventional loan. The seller wants 200k for the house. It appraised at 206k. There is not a lot of room to increase the equity in the home through rehab. It's definitely "turn-key!"

There is a detached garage. I've considered converting that to a studio apartment. I could easily do it for less than 10k. I would be able to add equity that way.

I used the BP rental property calculator, and the numbers on a conventional loan were no good. I've got a tenant lined up for a one year lease at $1,300 per month. But the mortgage payment would be $940, and the taxes and insurance would be $250. The homeowner owns the home outright, so I offered a seller-financed option instead.

He has agreed to 20k down, $800 per month, and a 24 month. Under that scenario, I'd be cash flowing $250 per month. Converting the garage could bring in an additional $500.

Two questions:

- Am I crazy for thinking this way? I am super new. And I have thick skin and really want to learn. So fire away!

- Does anyone happen to have a seller-financed contract that you'd be willing to share? I'm in SC. I'm not sure if they have to be state-specific.

Thanks in advance for any advice you might share!

Connor

[Nicholas Lohr]

2 things stick out to me about this....

1. You didn't mention utilities, maintenance, cap ex, or reserves. Don't forget about factoring all those in.

2. 10k to convert a garage into an apartment sounds super low. Are you sure you're factoring everything here? That garage must be ready to be lived in too for only 10k! Building department permit and city permit expenses factored into the 10k too?