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Updated over 1 year ago on . Most recent reply

User Stats

91
Posts
108
Votes
Kyle N.
  • Construction Project Manager
  • Sycamore, IL
108
Votes |
91
Posts

Ideas for seller financing with current mortgage in place?

Kyle N.
  • Construction Project Manager
  • Sycamore, IL
Posted

I've got a potential duplex deal where seller owes about $115k at 2.5% and is tired of the headache.  They just want it gone, and are open to me making payments to them.  The initial price they threw out was $240K, which is probably fair.  I feel I've developed a solid relationship with seller, and I want to help them out, but need to find common ground where we both win.  I've never done any sort of creative finance before.  I would obviously like to keep the [email protected]%, but curious as how to structure terms for the remaining $125K back to the seller.  How would you structure, or do you have any good resources (Posts, podcasts, videos, books) that would help paint a clearer picture?  

Current knowns:

Rent: $1050 each side (at least $200 under market rent)

Taxes $4,500/yr

Insurance: $1,500/yr

Tenants pay all utilities, mow and snow

One idea I have is to offer full price of $240k payable to the seller over a 30yr period at 2.5%.  That way my payment to them is almost double what I anticipate they are paying on their current mortgage.  After my conservative estimates, it barely cash flows for me, but I could bump rents fairly easily to help that.  Seller made a comment that this duplex was her 401(k), so by me making ~$950/mo payments to her for 30 years might do the trick?  I would have to figure out the details of ensuring sellers are paying the bank, or maybe I make the bank payments and send the remainder to the seller.  

Any guidance would be greatly appreciated!!

Most Popular Reply

User Stats

91
Posts
108
Votes
Kyle N.
  • Construction Project Manager
  • Sycamore, IL
108
Votes |
91
Posts
Kyle N.
  • Construction Project Manager
  • Sycamore, IL
Replied

@Mitch Messer and @Tom S.

I think the reason they're talking to me and entertaining the low down payment and low interest rate is because I used their original asking price.  She even told me that the price was negotiable, but I kept that $240k number.  I also met with sellers over the weekend and showed them my buying spreadsheet and showed them all of the variables that we could change/adjust.  I also told them that if they wanted to sell with a realtor, that would be quicker and they would get a lump sum of cash after paying off their existing note.  I also explained realtor fees, closing costs, and capital gains tax.  I try to live by the Zig Ziglar quote of "You can have anything you want, If you first help enough people get what they want" I'm not even sure I want this deal, but I'm excited over how much I've learned from this chat and by taking action to get to this spot.  It can only get better from here!  Thanks Everyone!!

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