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A.J. Vanderhoff
Pro Member
  • Investor
  • Springfield, OR
4
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Seller financing a triplex - $500k, $80k down, 6% - I don't have $80k, help?

A.J. Vanderhoff
Pro Member
  • Investor
  • Springfield, OR
Posted

A family friend of mine who is a long time real estate investor with several properties has offered to sell me one of his properties. It's a 5 bedroom house with two 1 bedroom apartments attached to it. 

He said a realtor has advised him to sell it for $500k so he wants exactly that as well as $80k down at a 6% interest rate. It's not on the market and he does not have to sell. If someone is interested in buying it (like me) he will sell for what he wants. 

I do not have the $80k for the down payment. If someone could help me with my situation of needing to raising capital and how I should go about it I would really appreciate the input. 

  • A.J. Vanderhoff
  • User Stats

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    Minie Quilala
    • Banker
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    4
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    Minie Quilala
    • Banker
    Replied

    Thanks for the update. Glad it worked out. I learned something here.

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    Chris Seveney
    Pro Member
    #3 All Forums Contributor
    • Investor
    • Virginia
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    Chris Seveney
    Pro Member
    #3 All Forums Contributor
    • Investor
    • Virginia
    Replied

    @A.J. Vanderhoff

    So you’re overpaying for our house is basically what you’re saying.

  • Chris Seveney
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    User Stats

    13
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    4
    Votes
    A.J. Vanderhoff
    Pro Member
    • Investor
    • Springfield, OR
    4
    Votes |
    13
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    A.J. Vanderhoff
    Pro Member
    • Investor
    • Springfield, OR
    Replied

    I offered him a larger purchase price in exchange for terms. My counter offers are: 

    1. 1% Interest (instead of 6%), $12k down (instead of $80k), and $535k purchase price (instead of $500k. 

    2. 1% Interest (instead of 6%), $0 down (instead of $80k), and $545k purchase price (instead of $500k. 

    Both of these options will give me about $1,000 cash flow each month once rents are up to the current market rate. These prices are a win for the seller and these terms are a win for me. 

    Equity comes and goes. For someone like me who wants to buy and hold long term with an exit strategy of turning properties into pensions some day when I'm old by selling through seller finance when the properties are paid off - $1,000 cash flow per month with low or no down payment and 1% interest is the perfect deal for me. 

  • A.J. Vanderhoff
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    Ron S.#3 Foreclosures Contributor
    • Paradise, CA
    864
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    1,932
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    Ron S.#3 Foreclosures Contributor
    • Paradise, CA
    Replied
    Quote from @A.J. Vanderhoff:

    I offered him a larger purchase price in exchange for terms. My counter offers are: 

    1. 1% Interest (instead of 6%), $12k down (instead of $80k), and $535k purchase price (instead of $500k. 

    2. 1% Interest (instead of 6%), $0 down (instead of $80k), and $545k purchase price (instead of $500k. 

    Both of these options will give me about $1,000 cash flow each month once rents are up to the current market rate. These prices are a win for the seller and these terms are a win for me. 

    Equity comes and goes. For someone like me who wants to buy and hold long term with an exit strategy of turning properties into pensions some day when I'm old by selling through seller finance when the properties are paid off - $1,000 cash flow per month with low or no down payment and 1% interest is the perfect deal for me. 


    ...and when your note comes due, and you can't refinance out of the maturity, what's your exit strategy? That's a nonconforming property, where you have fewer lenders that will bite on it so you are limited there but let's assume that's not an issue. Let's also assume you have the credit qualifications, you're going to have an equity issue in that you bought 10% above market (roughly) and even if you did it owner occupied in your refinance, you are still above 100% LTV so, you are limited even further with your exit strategy.

    Sounds like the only way this works is if he gives you a 30 year term. That doesn't sound realistic. Sounds more realistic that you get into this and when the note matures and you can't refi out of it, your handing the keys back to him.

    User Stats

    13
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    4
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    A.J. Vanderhoff
    Pro Member
    • Investor
    • Springfield, OR
    4
    Votes |
    13
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    A.J. Vanderhoff
    Pro Member
    • Investor
    • Springfield, OR
    Replied

    Both of these counters are 30 year. 

    Great observation, Ron. Thanks for the mention. 

  • A.J. Vanderhoff
  • User Stats

    18
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    Josiah Kellerman
    • Real Estate Broker
    • Eugene, OR
    14
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    18
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    Josiah Kellerman
    • Real Estate Broker
    • Eugene, OR
    Replied

    Dang AJ!! That is great work! Happy to hear things are progressing, Hope it closes soon.