seller financing/creative purchase option

[Brett Chandler]

Hello BP fam,

Looking for some insight on a possible purchase for personal use and long term investment. I recently found the 'subject to' and creative financing podcast and it got my wheels turning.

A little back story here: we bought two adjacent lots to our home, totaling 8 acres. Lots are raw land, mostly non-buildable, with about an acre that zoning would allow for 8 homesites. One issue is that it would require me to put a road through my back yard to access the homesites, which I do not want to do.

So here's my thought - Our neighbor on the other side owns two acres with a big shop. I would like to own the property for use of the shop, and access to the build sites without putting a road through our back yard. He is an older gentleman who grew up in the home and had to fight to keep the home when his mom passed away, as she had a reverse mortgage on it that I believe is free and clear now. All that to say, he is probably not going to be a motivated seller.

I was thinking offering to purchase his property with seller financing (something like $1,000/mo at 0% interest, with a 10yr balloon?). Then keep him as a renter for $1/mo. That way he would get to stay in the house for as long as he wants, make $1,000/mo, save the monthly tax and insurance cost, and not be responsible for maintenance. And I would get the access to my property, possession of the shop, and the home when he vacates (to rent, BRRRR, or divide and sell).

I would love to have you shoot holes in my plan, share any ideas you have, success stories, failures, etc. Thank you!

[Jake Wiley]

The answer is no unless you ask.   So the key is to start talking.   

I'd be honest about your plans and what you were hoping to do, especially being that he'd be looking to live there.    

One obvious issue is that you have no idea how long he is going to stick around, thus you could be in a situation where you are paying out way more than you expect to on the taxes and insurance down the road, with no offset or ability to offset the expenses with him still occupying the property.   The flip side is that if you are comfortable with the economics assuming you have to hold the property forever then no issues there.    

I'd consider asking the town whether once you own his lot you could redraw the lot lines to have the access road attached to the acre you are looking to develop so that you could ensure that access to the landlocked acre or ownership is never an issue going forward.  If all that works out, you could potentially deed the smaller lot with the home on it back to the owner if it ever becomes a burden down the road, or this could be how you get the deal done.    If he doesn't need his two acres, then maybe you could buy off the portion you want, leave him with what he wants and get the deal done that way.  

Sounds like fun!