Benefits of Seller Financing for an Older Couple

[Tim McGarvey]

Hello all,

Question about owner/seller financing, here the situation:

My grandparents who live in California (about age 75-80) are trying to sell my great-grandmother's house in rural Pennsylvania (about 100 miles east of Pittsburgh). After about 6 months on the market, they finally received their first offer, though it came with the caveat that the buyer requested seller financing. I'm aware of some of the benefits of seller financing, such as a higher overall return and steady income stream but I'm wondering what type of drawbacks there could be to them in this situation (specifically an older couple living across country from the property). I suppose its ultimately up to them to decide, but could going this route be more trouble for them than it's worth? Rather than just receiving a lump sum and forgetting about it. 

Knowing that I am trying to get started in real estate investing, they also asked me what I thought about renting out the property. My initial reaction was that it would be difficult to find rented in the area (county population of 81k, city population of around 1,000). I'm not too familar with details about the property, but I would imagine it would need at less a few thousand in repairs and that the finishes in the house are not currently "renter-proof". I also see difficulty in finding trustworthy contractors and a property manager from a town that small so far away from them. Has anyone come across a situation like this where they would a way/process to make renting work? 

Lots of questions here, just wondering general thoughts or ideas that I may not be thinking of. Thanks!

[Chris Mason]

FWIW, the few times I've refinanced someone out of seller financing, that the lender/seller was a little old person, said old person was pissed because they'd become dependent on the monthly income stream. 

It's unlikely that the little old person seller/lender could take that lump sum payout, put it in a CD or anything else comparably safe, and get more than they were getting from that loan.

So a pro and a con:

• Pro: Better regular payout than a similarly safe-from-default instrument, like a CD, would pay (everyone here knows that a CD is just you lending money to a bank, right? Then they turn around and offer it to someone as a HELOC at 4.5%, and that person lends that same exact money out as hard money to a BP member at 12%. :P ).
• Con: Easy to become dependent on this incredibly non-diversified vehicle. A bank can't pay you back earlier than scheduled, but a mortgage borrower generally can (by selling, refinancing, or simply writing a large check).