First time buyer! House Hacking a Multifamily Home/ New Jersey

[Justine Veal]

The house I'm interested in is a triplex and it is paid off by the seller and doesnt have a mortgage. Should I purchase it with a traditional FHA loan or should I ask for seller financing? Any advice?

[Nathan Gesner]

I like owner financing because you can usually get some really good terms and it benefits them by reducing their taxes.

I usually make a strong offer, close to market value. Then I offer an interest rate higher than what the banks are charging, usually 5%. I ask for the loan to be amortized for 30 years but with a balloon payment around 3-5 years. They can cash it out at that point or they can extend another 3-5 years. I have two owner-financed properties that are due for a balloon payment this year but both sellers like the steady income and low tax impact, so we're going to extend it for another three years.

Owner financing can be done through an attorney. They will prepare a promissory note, a mortgage, and the amortization schedule. It's actually pretty simple and not nearly as complex as the forms required by banks.