Owner Financing Questions

[David M. Hagley, Jr.]

I am looking at a possible deal and considering asking for owner financing.  This project also needs quit a bit of rehab.  I have some questions.
1. Is there some guidance or things to watch out for when trying to structure this type of deal?

2. Also, what are the options to finance the rehab?  Are there ways to finance that cost?  What are the pros and cons of them?

Thanks,

David

[Charles Carillo]

@David M. Hagley, Jr.

Great question; seller financing is definitely the way to be leaning in this market. Speak to your RE attorney about structuring after you have some sort of verbal agreement from the seller but I would tell the seller you are going to invest X amount into the property within the first 90 days and that you want your down payment to reflect that (down payment - X). So if a $1mm property requires $100,000 worth of work; maybe tell them $100k down and $100k into rehab. Give them a list of the work you are doing in 90 days and what a licensed and insured contractor has quoted you. For example; roof $20k, HVAC systems $20k, hot water heaters $5k etc. Selling point is hopefully his value is going to increase to possibly $1.1mm+ once the work is down which will have him sitting at ~80% LTV (if you can get it rented etc.). I would show them proof of funds that you have the money for the down payment and the work. Lastly, write the debt with the longest term they will accept with no prepayment penalty.