Seller FINANCING!!! Let’s go!!

[Jack McWatters]

Hello my bigger pockets friends!

I’ve got a deal, a house that has been vacant for some time. Now I did my due diligence and found out the owners name and got his email which eventually led to me getting a call from the guy! I was green and unsuspecting of his call and was caught off guard. Now I remembers some of my script I was going to ask him but all in all I had a good conversation with this guy legit.

His house which has been vacant since 2018 I believe has a terrible front yard and the exterior of the house is just poor. Now the inside and out back is to die for, A LARGE backyard, a pool, a mother-in-law suite I mean come on what more can you ask for. It’s a 3 bed 2 bath in the Fullerton California area. Here’s my plan and I want your guys feedback.

I want to get the guy for a meeting, he lives close, and really just create some rapport and gain his respect and learn from him I want to purchase the house for 650k-750k I believe the house is valued at 850-950k if I do the exterior work. Stuff I can do myself. Now I am new and can not afford that, so I’m hoping because this guy has had it vacant for so long and put nothing into it so far that he’s be willing to seller finance me.

(This is an ideal situation!) feel free to leave your own!

650,000 purchase price.

1,805/month in a 30 year mortgage at 8% interest.

23,400/year with that 8%

Totaling at 702,000 for the total cost at the end.

My theory is that if he would like to make a monthly cash flow of ill round it to 2000 a month with little tax compares to selling full cash and having to pay the taxes on it, also leaving himself a legacy of cash flow for him that gets paid each month, even after he passes away, he would be inclined to leave his family with that cash flow rather than a lump sum.

Now for me, I can live in the back unit with my buddy renting him at 750/month.

I can then rent each room in the house for 1000 a month.

This would leave me with a monthly cash flow of 1750, which then can be used to pay off my debt faster, gaining credibility with my lender, and putting money into savings while living in a gorgeous house.

TELL ME WHAT YOU THINK!!

I really need help with the legalities if you know any accountants, or real estate attorneys in southern California I would love to get in contact! Btw I have access to an outstanding GC.

Hop

[Matt Hurley]

As Andrew says, a 100% loan (no down payment) of $650k @ 8%APR Over 30 years is $4,769.47/mo. And that's not including your other payments for taxes, insurance, capital expenditures, vacancy and other variable landlord expenses. Even if you rent all 3 beds of the front unit out for $1k, then another $750 for your buddy in the back, you're looking at $3,750 which won't even cover the P&I let alone the other expenses.

Additionally, I would be shocked if you were able to do 100% seller finance deal with the owner. 9/10 they will want some sort of down payment, do you have that? 

Lastly, do some research and make sure you can rent out the front unit by room. This is a restriction in many places that is decided by the zoning of the house. Are there permits for the mother in-law suite? Are you allowed to rent at all to multiple parties, or only to one family? 

If you’re only looking to reduce your cost of living, then this deal might be worth it. But the fact that it wouldn’t even cash flow after you leave would worry me. More research needed