Balloon Mortgage on MFR

[Ramon Vazquez]

I have an opportunity to buy my first MFR (fourplex) with seller financing. The terms are 20% down, 5% interest rate, 5-year balloon. The properties are under market value and I know I am accepting some risk with the 5-year balloon, but I may lose the deal if I push back on the seller financing. Thoughts?

[Wilson Lee]

You are good.  They are giving up equity and you have 20% down.   Refinance as soon as you can.  You can try in 6 months, seasoning, but if you don't have rental income on your tax returns some banks may make a fuss.  You can also refi next year after you report the rental income on your taxes.

Some things to include.

Still pay for your own appraisal and have a appraisal contingency in the purchase agreement. They they push back. I would question why they are avoiding an appraisal.  You need to know if you can refi and not have to sink more cash in to the project down the line.

You can ask for interest only payments if they are asking for a balloon.  fair is fair.