Owner financing, what is a good deal?

[Ethan Board]

What’s going on guys? Just starting my investing journey. Wanting to house hack and buy a duplex and live in one side. I currently have my house for sale and I don’t have much equity in it. Roughly 15k after I pay closing etc. I have my eye on a duplex. It’s in the flood zone so to get out of that I’d like to do owner financing but not sure how to negotiate the terms on that. What’s a good interest rate? How long are the terms for owner financing? Any other advice would be great, thanks!!!

[Jaysen Medhurst]

@Ethan Board, good on you for looking at a house hack. Great way to go.

My 1st questions is, why do you think you'll "get out of" the flood zone with owner financing? Do you you mean get out of having to carry flood insurance? Unless the current owner is a moron, they will require that in any financing they provide. It's not like they don't know they are in a flood zone.

In terms of rate and terms, it's all open. That's the cool thing about owner financing you can propose and negotiate anything, as long as it's legal. If you're trying to do no money down, expect to pay a higher rate than you would from a bank. I think a good approach is to figure out what you're comfortable paying monthly and then reverse engineer an offer based on that. 30 years at 8.5% is about the same monthly payment as 20 years at 6.5%.

Other than that make sure all the same protections are built into the mortgage. E.g. no penalty for early pay-off, etc.