Seller Financing Help

St. Louis, Missouri
Innovative Strategies
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Seller Financing Help

Sam Runge
Rental Property Investor · O'Fallon, MO · Member since 2018 · 9 posts · 2 votes

Hi BP!  I'm looking for some insight on pros and cons of seller financing and what that formal process looks like.

A family friend built a duplex ~30 years ago and owns it outright and wants to sell.  I believe he might be a decent candidate for seller financing but I have not discussed that with him.  I'm looking to purchase this property as a house hacker to make some updates and expand my portfolio from (1) duplex to then (2) totaling four units and two properties.

He claims he's never had issues keeping tenants and it's a decent neighborhood.  He plans to sell for $265k and I've expressed interest.  My situation would be to purchase at 15% down with traditional financing.  My income is plenty sufficient for this purchase but don't have all that cash on hand so about half that down payment would be a legal gift from my dad (paid back at a small interest).

I'm curious what people see are the pros and cons of my situation, if a seller financing offer makes sense, and what the formal process would look like to make such an offer?

Respectfully,

Sam

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  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    @Sam Runge

    Yes, he does sound like a great candidate for seller financing. When I am assessing a potential seller financing deal; I speak to the seller and find out what they are most concerned about. It usually is one of three things; down payment, interest rate or purchase price. You can then skew the deal because of that point.

    For example; if he really wants $265k; great, propose a lower down payment of say 5%-10% and an interest only mortgage rate of 5% paid monthly. I would also remind him that he is saving 5%-6% by selling it without a broker. 

    Side note; he probably doesn't have trouble keeping tenants because he never raises the rent (much).

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  • Frank Zhang
    Real Estate Agent · Daytona Beach, FL · Member since 2019 · 37 posts · 15 votes
    4y

    15% is enough skin in the game to be a serious consideration for seller financing. Another point I would push in addition to the ones listed by @Charles Carillo is that you will be making updates to the properties which will only benefit the seller if you aren't able to execute. It is a win-win for the seller whether he agrees to your terms to purchase or if he gains upgrades to his properties without any cost. 

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