Owner Financing Terms?

[Anthony Power]

How would you set up a owner finance deal in this current market? I'm curious if a seller offered that they would be open to seller financing what terms would make the most sense for both parties, would you go with a short term loan with a balloon or try to negotiate for long term financing? I know that the terms a largely dependent on the the exit strategy but what would you do? I ask because i'm looking to negotiate terms on behalf of the investors in my area, granted that each investor has slightly different parameters, if I can get a general consensus on the topic it would help a lot!

[Jacob St. Martin]

This is kind of a tricky question to give a blanket answer to. The thing that makes seller financing so great is that the terms are negotiable. The terms that I would offer are the terms that make everyone the most happy. Is the seller someone who owns a bunch of properties free and clear and is in their 70s and sick of managing them but wants passive income for the rest of their life? I would negotiate a lower down payment, purchase price, or interest rate (depending on what is important to the buyer) but with no option to sell or refinance for a given period to guarantee the income that the seller wants. Does the buyer want to do 0% down seller financing? Well then the seller might want a higher interest rate or purchase price. Does the seller want their capital returned in a couple years, add a balloon payment. Does the seller want the highest possible sale price and the money right away? Then they shouldn't be doing seller financing! I personally am typically interested in seller financing because I am looking for low money down solutions and my DTI is really high so I would be willing to pay more and with a higher interest rate to get the low money down component but this will really depend on your buyer and seller.

I hope this is helpful! Sorry that there isn't a clear, one size fits all solution