first deal, seller financing, no agent, am I doing too much?

Question

Hello fellow BP-ers. I am contemplating moving on a deal in philadelphia. The property is exactly what i'm looking for in a live-in flip/potential buy and hold. The seller is motivated because the property has been on the market for a relatively long time. Its already priced within my budget (asking price is significantly higher than i'd be willing to pay though) and its being sold by owner who i suspect is another investor. Ideally id like to get them to come down about 23% from their asking price and carry a 3 to 5 year note with a balloon payment and around 10% down. This is my first deal and i'm trying to soak up as much info as I can so any insight is appreciated.

1. Is this all too ambitious for a first deal?

2. How do I best approach the seller about owner financing?

3. would I be better off working with a buyer's agent?

4. I'm 100% sure i'd qualify for a regular mortgage but i'd rather seller finance. should i just go with a traditional mortgage instead?

Thanks!

1. Is this all too ambitious for a first deal?

2. How do I best approach the seller about owner financing?

3. would I be better off working with a buyer's agent?

4. I'm 100% sure i'd qualify for a regular mortgage but i'd rather seller finance. should i just go with a traditional mortgage instead?Thanks!

Gino Barbaro · Answer

@Miguel Luzon@Jake Stenziano

Hi Miguel,

I don't think it is too much for your first deal.  Seller financing works when you educate the seller on the benefits, such as having residual income and not being hit with a possible cap gains on the entire sale.  If you use an agent, most do not understand seller financing and may even talk you out of it.  Seller financing works if the seller is motivated, which it appears you have.  Try the seller finance route first.

The general rule is you can get either price or terms.  If you have to meet his price or come close, then you should be able to dictate terms, i.e seller financing, length of note, interest rate, etc.

I think you have the right mindset for the first deal.  Aim high like you are doing.

Good luck!

Brian Gibbons · Answer

@Miguel Luzon

here's some rules

1. If you pay cash your profit when you purchase the property not when you sell , always have walkway power for cash offers

2. When you do terms deals, you're looking for the seller to participate and partner with you the buyer;

"I don't know if I could do this Mr. Seller, and I have to check it over with my partner, who handles the finances, but what if I could do this...."

"As it costs 10% to sell, with sales commissions and closing costs,  so the property is worth at top retail (say 90% of comps or value)"

"And that's breaking even, paying full retail, and I know my partner is not going to do that,"

"what we could do is partner where you hold a note for your equity, and you'd be the bank, you know the collateral and IF we don't pay you, you can repossess the property

"There are a lot of properties that I'm interested in but yours looks pretty good if we can get the terms"

Have walkway power👌

Lynn Harrison · Answer

Make sure you go down to building and planning, and whoever oversees environmental health and pull the files before you sign anything. Make sure there are no red tags or hook up fees etc needed. Also, do a title search before signing ANYTHING unless you are using an agent and have contingencies. I would use a real estate lawyer, myself... That money would be very well spent.

Tom S. · Answer

@Miguel Luzon - Thanks for the update and good luck!

- Tom

Miguel Luzon · Answer

Hi tom, nothing as of yet. i'm still looking at other properties and other options. I want to make sure I am prepared and have a better understanding of exactly what i am getting myself into before i put any money on the table.

still considering an agent and definitely shopping around for a good real estate lawyer.i'll keep everyone updated, but it'll be a little while. :)

Tom S. · Answer

@Miguel Luzon  Miguel - any update on this potential deal?

Thanks,

- Tom

CJ Wallowitch · Answer

Hi Miguel,

Those rates are pretty competitive however, my hard money bank can do better! In addition, I have a lot of investment property for sale in Philly and the surrounding areas, all sold .50 to .60 cents on the dollar. Shoot me a call or txt if you would like to learn more about what I am doing in the area.

Miguel Luzon · Answer

Thanks I'm glad to see I wasn't too far from the mark on this. I'll be contacting the owner in the next few days to get the ball rolling. I appreciate you taking the time to write me. Newbies like me would have a much harder time without you guys.@brian Ill keep in mind the importance of leverage and walkaway power when negotiating. Good tip!

@Gino I'll keep you posted on how things work out. thanks!

first deal, seller financing, no agent, am I doing too much?

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