Buying STR (Vacation Rental) with owner financing

[Villy Ellinger]

I'm considering making an offer on a vacant, absentee-owner unit in Destin to use as a vacation rental. It's in a complex that is mostly used for STR/vacation rentals. I'd like to get owner financing (and am told that might be a viable option with this particular seller). Has anyone done this before? If so, what terms did you offer? Down payment size? Term length? Special stipulations, etc? Looking for feedback and/or advise. Thank you!

[Eric A.]

The next thing you do is start asking questions. Are you talking to the owner directly? If you are going through a realtor ask to sit down with the realtor and the owner. 99 out of 100 realtors have no idea about financing or terms. I actually had a moron tell the seller that they had to have a down payment, it was a government law. Complete idiot!

Following questions to the owner:

1. How much monthly are you looking to receive for your equity? Not lend you!!! They are not lending you a dime, big difference!

2. Once they have thrown out some terms, do a quick analysis, and if it’s a steal write up the contract. If not, ask to go over everything and get back to them. If they can’t sell it now it’s not going any where fast.

3. Owners who have not done owner financing before focus on the price. Who cares what the price is. What if the property was worth $400,000 and you agreed to buy it for $600,000 at $2,000 per month for 300 months with nothing down and cleared $1000 a month. I would call that a homerun. So, don’t worry about the price your job is to get the best terms.

4. If you do get everything right and buy it, get a right of first refusal in the note if the note is sold. This allows you to buy it if another note buyer comes to the seller and buys it. Also, call the note holder every year and offer 57% of face value for all cash right then. Trust me, it works!

Hope some of those pointers help. Let me know if you have any other questions.

“Great deals aren’t found they are made.”