Seller financing with a bank loan in place

[Carrie Hallensleben]

I have found an investor who would like to sell a bundle of properties (3 SFH) in an area that I am very comfortable with. He has them priced below appraised value but the appraisal was done in 2009. He is willing to do seller financing but he has a traditional mortgage in place. We are meeting this week and I have a call into a lawyer. I have been reading like crazy about subject to and lease options. I want to show up with knowledge and this is the first seller financing deal I've ever negotiated.

Because there is a loan in place, I'm worried about a due on sale clause.  

What I know so far: 

3 houses - asking price $327,000 - current monthly rent $2600

Don't know any details of current mortgage or amount of equity

From our side:

We'd be able to put down 10,000 or 15,000 -(some of which would be borrowed money from our HELOC)

We'd love to do a 15 year seller financing and own outright at that point

Questions:

How would you structure the deal?

What kind of interest should we be paying?

How does the 5% over market with no interest at 180 payments type of deal work? (read about it on BP)

Could we set up a lease option that allowed for some of the payment to go to principal in order to drop the purchase price and then finance out later on? 

Looking forward to your ideas!

[Brian Gibbons]

Hi @Carrie Hallensleben

You can 

-Buy on 

• sub2 plus note + mortgage or
• a wrap or
• an installment land contract.

-Lease on a 

• Sandwich lease option, sub lease and sub option

-I like no interest on note but there is imputed interest from the IRS to the owner

1. Analyze 

Market rent - payment to owner  = your cash flow profit per month;

must pay all costs (taxes, insurance, maintenance, vacancy) with some profit

2. I would "buy and hold" if I got a low enough outgoing costs, wait for free and clear of debt in 15 - 20 yrs

3. Offer their price and your terms (low PITI Payment)

4. Get new appraisals on FMV (sale price) and FMR (market rent). You need them in cash IRS audits. See

http://www.biggerpockets.com/blogs/3/blog_posts/45...

Good luck!