Fair interest rate for owner finance

[Moshe H.]

Hi everyone, I am trying to develop a bid on a commercial mixed use property that I would like owner financing on. I was playing around with the numbers but I'm wondering what the lowest interest rate is that I can offer and still feel like I'm being fair to the seller. I was thinking of 7% but I kind of pulled that out of a hat and I don't want to overpay. The seller is motivated and is an owner/operator not a real estate investor so I don't think they'll push too hard on the rate.

Any ideas? :-)

[Kent Harris]

In Texas the going rate seems to be 9.9%. I have a 4.25% mortgage on the one I'm about to owner finance. I'm also going to charge 5% above market for the property. My competitors charge 10% above market. My intentions are to roll them into a conventional Mortgage after 2-5 years. If you charge 5% above market and Real Estate is going up 3% per year then you can roll them into a conventional mortgage in a couple of years. The interest rate also depends on the down payment, the higher the down payment the lower the interest rate. In Texas you can evict someone in 21 days. A foreclosure takes 6 months. In my rental business, cash for keys seems to work 80% of the time. Last year I only went to Eviction court once. The Tenant had an attorney and counter sued me for discrimination against an elderly person. The judge threw out the discrimination charge saying. "If the Landlord wanted to discriminate  against you he would have not have rented to you in the first place!"  

In owner finance I imagine you can offer someone $2,000 to move out and there is a good chance they would. Hope this helps.