Seller financing……is it risky???

[Ali Kattan]

Hello everyone,

I am hoping someone can give me an insight on seller financing. I have a couple of rental properties that I have owned for a few years (purchased through your typical mortgage with a bank).

My realtor presented me a property that was being sold by an investor who is offering seller financing, which is a first for me. The rate is 8% interest with a 6 year ballon (10K down on the property, which is being sold for $110K). The monthly payment includes taxes and insurance and will likely be off set by the monthly rental income. So I will be breaking even every month.

My question is, what are the risks in seller financing? Does this sound like a bad deal? My plan is to let the renter pay off the debt for a couple of years, then refinance or the home via bank loan at which time hopefully I will owe roughly 50-70 percent of what originally purchased at.

Can anyone please share their experiences with seller financing and tell me what you think? I appreciate any and all of your input.

Thanks,

Ali Kattan

[Tracy Tippett]

Hello Ali Kattan,

You can certainly minimize your risk by insisting of a full compliance title search and transfer. Make sure you have the documents reviewed by a competent real estate attorney. Make sure you calculate the ROI and can quickly move to profitability. Make sure there are no pre-payment restrictions. I have purchased with seller financing and other than some personality quirks, it has been quite rewarding.

Good Luck!