Owner financed offer and amortization schedule

[Carlos Webel]

Dear all,

I'm working on a 3/2 SFR rental lead in Houston Metro area. Asking price is 175k$ and I'm coming back with the following 2 offers:

• a)160k$ cash, no contingencies
• b)175k$ Owner financed with 40k$ down and 135k$ financed over 30 years at 4% with no pre-payment penalty

I’m structuring the amortization schedule such that the monthly payments are exactly the same $ amount as with a conventional loan; however, I’m turning it into a fixed interest / fixed capital amortization schedule to build up equity much faster. The way I came up with the numbers was using a conventional amortization schedule and summing up the total amount of interest over the term of the loan (360 months), then dividing that amount over 360 to come up with a fixed monthly interest and hence a fixed capital amortization.

As a result of this change, my equity build up during the first 5 years is $22500 instead of $12896 (with conventional amortization schedule).

Has anyone done this before? Any comments on your experiences? Is this considered legal in Texas and/or other states? Can this be called a 4% interest rate loan? We will run this through a lawyer and provide full disclosure of the details to the buyer but wanted to get some feedback from the greater community upfront.

Thanks, Carlos