NH 6 Unit Seller Financing

[David Bennett]

Hi, 

I'm considering a seller-financed offer for a 6-unit apartment building in NH. I know the landlord and I believe he owns the property outright. Because I cannot (easily) come up with the necessary down-payment I am considering various seller-financing offers as follows: The owner has listed the property for 365k.

1) 275k over 10 years at 5.0%: 10.5k down; total interest=73k; total cash to buyer=353k;

2) 325k over 15 years at 4.0%: 10.5k down; total interest=104k; cash to buyer after interest=429k;

3) 350k over 20 years at 3.0%: 10.5k down; total interest=112k; cash to buyer after interest=462k;

This is a naive offer by default because it's my first seller-financed offer. Therefore, I'm sure there's something I'm missing or, more likely, the interest rates I'm offering are not appropriate (?). I'm keen to hear any feedback from others here at BP regarding the merits and/or faults of this offer. 

thank you!

-Dave

[Bill Gulley]

First, regardless of your willingness to pay thousands for financing that is not necessary, know that financing DOES NOT add value to a property, any property.

Next, even if your seller agrees to carry the loan long term, things happen that require a mortgage to be paid off by selling or refinancing, if you don't have equity based on the property value, you're screwed.

Come to the value of the property first, then finance it.

Such deals usually take 10% down, if the property is difficult to finance otherwise you might get a deal with less down or if you are perceived to be a strong buyer with experience.

Sell your offer from the benefits to the seller, a higher interest than they may otherwise earn on similar investments, an annuity income as they had with rents, tax advantages of deferring gains on the sale, add professional management of the loan with a loan servicer to make it hassle free and it will be more attractive, much safer for you too.

Read up on seller financing topics in the forums, not podcasts or youtube or comic books.

Much better to go in at a lower price and higher interest, sellers rather have interest income than taxable gains, it also gives you equity and the ability to refinance if necessary or leverage another deal with that equity. Good luck :)