Seller Financing now then Refi later?

[Jill Smith]

I've listened to some of the podcasts about seller financing and think this could be a good strategy for my next deal.  I notice that most of the guests that purchased properties will seller financing state that they later refinanced into conventional financing.  What is the benefit of refinancing later?  What is required to refinance a seller financed deal - is it similar to a regular refi or are there other things to consider?  Thanks for any info!!

[Derek Dombeck]

I have a different point of view. When I structure a seller financing deal, I negotiate an extension into the deal upfront whenever possible. Recently I did a deal with a seller at 127k loan on a 132k purchase. We structured a 3% interest only payment with an 8 year balloon.  If we get to the balloon, I can buy an extension with a 5k payment that goes towards the principal. I did another one at 0% interest for the entire purchase price of 70k. That house needed 15k in rehab. So I'm using my cash to improve the value of the property which makes the sellers collateral safer. I also built in an extension on that deal. I can buy a 2 year extension for 5k, again the money goes directly to principal reduction.
The point is to negotiate good terms upfront and you may never have to use a bank again. That's always my goal.