Need Help Structuring Seller Financing Deal

[Adam Meadows]

Hi Folks,

I'm looking to structure my first seller financing deal on a property I'm going to see tomorrow. I know the seller from an open house when his property was listed. It didn't sell, and he reached out to me a few days ago to work out an off-market deal. Here are the details:

Property: 3/1, 912 sqft, 10,000 sqft lot, built 1950's

ARV: $130-140K

Asking: $100K

Repairs: $20K (estimate)

Rent: $1200/mo

The seller owns it free & clear and wants at least $70K down. He hasn't mentioned anything about interest (and I'm not going to bring it up unsolicited). So here's what I'm thinking:

Purchase price: $95K

Downpayment: $70K

Cash flow: $800/mo

COC return: 10%

Terms (Financed amount $25K): 24 mo, 36 mo, longer? Fixed monthly payment ($200-300/mo) with balloon at the end? If he asks for interest, what's a reasonable rate (5%, 7%)?

My strategy is to wholesale this deal to an investor in my network. Thanks in advance!

[Steve Vaughan]

Most of my off-market seller financed buys are with 10% down.  75% down without any equity to speak of can only work for a super long-term hold.  A great asset in a great neighborhood with 1% rents per month can work if you hold for decades.  

But, when you throw in that it needs $20k in work you're kinda in no-man's land. As a B&Her I want a rentable house in good shape and will pay 90-95% of FMV with good seller financing. A flipper needs a steep discount. You're neither. See what I mean?

I'd be skeptical putting so much down. If every i isn't dotted and t crossed you/your buyer  could really lose a lot of money here.  What if it's a contract for deed or land contract and you don't even get ownership?  What if the seller dies or gets a judgement placed against him?

Put down less money or buy outright so he doesn't have a 25% first mortgage @Adam Meadows.  The seller is definitely in the driver's seat here.