What rates are you asking for on owner-financed deals right now?

Boise, ID · Member since 2020 · 84 posts · 87 votes

Looking at an opportunity and want to make sure my expectations fit the market. Its a commercial redevelopment opportunity, looking at owner-carry with 18 mo balloon payment.

3 Reply

97 views

Most Popular Reply

Shannon Allen

Real Estate Agent · Boise, ID · Member since 2020 · 31 posts · 43 votes

Have you reached out to the owner? Is this a deal going through another realtor? If you can start a dialogue with the other party you might be able to come to terms faster then throwing numbers at them! Find out what they want out of the deal!

Good Luck

2 Reply

See this reply in the discussion

18 Replies

Jump to latestLatest

Sort by

Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y
@Robert Frazier
If I was selling and it’s commercial I would be at 10-12%
7e investments53 Reviews
Website View Page
1 Reply
Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
How much are they putting down? PG? I'd say 10% without knowing more...
1 year T bill is at 3, banks are at 6-7%, I don't see 8 making sense...
1 Reply
Abby Shemesh
Investor · San Francisco, CA · Member since 2014 · 21 posts · 31 votes
4y
Based on your description above, you need to be in the low double digits around 10% to 13% depending on down payment and recourse
1 Reply
Brandon Hicks
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
4y
@Robert Frazier we’ve done a couple of self storage deals the last couple of years where the seller held the financing for us in first position. We put down 20-25% on both and got what it would’ve cost us at the bank for a rate. Roughly anyway…1st was in Feb of 2021 and we got 5% on that one. 2nd was Feb of 2022 and it was 4.25%. We did a deal where the seller held a 2nd too and it was at 4.0%
We just wrote 2 offers today on a storage deal where one of them was for 80% seller financing at 5.0% and the other was a standard bank financing structure.
We don’t need seller financing so we don’t want to pay a premium to get it. Either they want to finance it or they don’t.
1 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4y
Quote from @Robert Frazier:

Looking at an opportunity and want to make sure my expectations fit the market. Its a commercial redevelopment opportunity, looking at owner-carry with 18 mo balloon payment.

An 18 mo balloon payment is awfully tight. If I was buying it'd have to be at least 3 years if it's a balloon, with an option to extend and no prepayment if I paid you off early.

1 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4y
Quote from @Ronald Rohde:

How much are they putting down? PG? I'd say 10% without knowing more...
1 year T bill is at 3, banks are at 6-7%, I don't see 8 making sense...

Please explain your thoughts.
0 Reply
Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Quote from @Account Closed:

Quote from @Ronald Rohde:

How much are they putting down? PG? I'd say 10% without knowing more...
1 year T bill is at 3, banks are at 6-7%, I don't see 8 making sense...

Please explain your thoughts.

the risk for owner financing is higher than any other lender/return on capital. If conventional lenders are lending at 7%, why would you take more risk to lend at 8%?
1 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4y
Quote from @Ronald Rohde:

Quote from @Account Closed:

Quote from @Ronald Rohde:

How much are they putting down? PG? I'd say 10% without knowing more...
1 year T bill is at 3, banks are at 6-7%, I don't see 8 making sense...

Please explain your thoughts.

the risk for owner financing is higher than any other lender/return on capital. If conventional lenders are lending at 7%, why would you take more risk to lend at 8%?
Actually, I have done owner financing at 8%. It's wonderful. It depends at what interest you own the debt.
I bought a house Subject To for $100 and taking over the existing loan. The loan was current but they had just refinanced so there was no equity to speak of.

Then I put together a lease option for $50,000 more than what I bought it for, where I got a $25,000 option fee, $25,000 more to be paid when the option is exercised and a payment at 8% interest which gives me a positive cash flow of $900 per month.

When they exercise the option I'l get the rest of the $25,000 they owe me from converting the option to a purchase.

Meanwhile I get the tax write offs.

Since appreciation has gone up they get the appreciation.
Why would they do this?

Their credit report, while not nasty, wasn't good enough to qualify for a loan so they have used the time to straighten out their credit.

I do this in Arizona & Texas mainly but I will also do it in Ohio and Indiana in the right properties. Some of the properties get only $500 positive cash flow but I've gotten much, much higher.
0 Reply
Shannon Allen
Real Estate Agent · Boise, ID · Member since 2020 · 31 posts · 43 votes
4y
Have you reached out to the owner? Is this a deal going through another realtor? If you can start a dialogue with the other party you might be able to come to terms faster then throwing numbers at them! Find out what they want out of the deal!
Good Luck
2 Reply
John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 803 votes
4y
if i was a seller and got my price in todays market (which should be high), I would work with the buyer on a competitive interest rate terms say like 6%. Maybe even better depending on the size of the downpayment.
1 Reply
Wale LawalBusiness Member
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
4y
@Robert Frazier
It depends on the how much you ar putting as down payment and also it will be higher than the conventional lenders rates.
If conventional rates are around 7% than it can be around 10%
Talk to local agents to know what they are doing.
Good luck!
[email protected]832-776-9582 Podcast Guest on Show #469
NETWORTH BUILDERS5236 Reviews
Website View Page
1 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
4y
Quote from @Robert Frazier:

Looking at an opportunity and want to make sure my expectations fit the market. Its a commercial redevelopment opportunity, looking at owner-carry with 18 mo balloon payment.
So, what did you end up offering?
0 Reply
Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Quote from @Account Closed:

Quote from @Robert Frazier:

Looking at an opportunity and want to make sure my expectations fit the market. Its a commercial redevelopment opportunity, looking at owner-carry with 18 mo balloon payment.
So, what did you end up offering?
OP disappeared. I always wonder why these people post, get tons of helpful comments, then never come back!
1 Reply
Zack Gill
Dallas, TX · Member since 2019 · 36 posts · 3 votes
4y
Right! I'm reading this b/c I generally want to learn and then never find out the result...
My current situation is trying to purchase a storage operation in small town tx and have a decent lead and want to learn if seller financing is an option and favorable for the seller and me. Seems as tho if I asked him to take maybe a slightly less purchase price but pay him 7-8% then he makes up the difference in a tax advantage way. If I default doesn't that just mean the seller gets the facility/property back?! Seems like its a win win for both parties w reduced risk?!? What am I missing?
0 Reply
Zack Gill
Dallas, TX · Member since 2019 · 36 posts · 3 votes
4y
@Ronald Rohde you have any storage connections or brokers you're familiar with?
0 Reply
Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Quote from @Zack Gill:

@Ronald Rohde you have any storage connections or brokers you're familiar with?

I'd just check craigslist and loopnet for expired listings. Make a google search of all assets you're interested in. The brokers will only list large facilities in smaller towns. mathews, MM, etc.
1 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
4y
Try and get it less than what the market is offering. I'd shoot for 5% max
1 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.