I'm in the process of vetting some seller financed deals for my solo401k portfolio. I'm looking at monthly cost to seller vs. anticipated rental income, purchase price relevant to the ARV of the area and interest rate, balloon, etc. What criteria do investors use to determine if a seller financed deal is good? What should I consider about the purchase price, interest rate, and other terms?
I'm in the process of vetting some seller financed deals for my solo401k portfolio. I'm looking at monthly cost to seller vs. anticipated rental income, purchase price relevant to the ARV of the area and interest rate, balloon, etc. What criteria do investors use to determine if a seller financed deal is good? What should I consider about the purchase price, interest rate, and other terms?
When I do a seller financed deal, I'm looking at a pretty broad range of factors. The first thing I ask is why am I Buying the property.
I always look at the exit strategy first, is it going to be a rental, a lease option sell, am I planning on living in it. Just because a seller is willing to do seller financing doesn't mean they will sell for a price that makes sense to buy. They are either dealing with a property they are having problems with or they want more than market vale.
But, basically it's experience that wins the day. Unfortunately experience means you've made some costly mistakes :-) So, to avoid those costly mistakes, when I take on a new approach in investing, I buddy up with someone that already has experience doing them. Because there are nuances to seller financing, a lot of space would need to be devoted to covering the subject to make sense, and that requires sitting down to a cup of coffee for a long discussion. It also gets treated differently in Texas vs CA vs AZ. There are state specific items to take into consideration.
@Felicia Vinces it sounds like you missed our Year End Live show and Podcast of "Real Estate Notes Show' where 2 15 year experience note investors break down what makes a note valuable.