First Deal - Owner Finance

[Wes Shepherd]

Single Family Residence

New furnace, plumbing, electrical ( Does not need any rehab work)

$25,000 Purchase price, should rent for at least $375. Owner is willing to finance 10% down at 6% for 30 years. Taxes are $500 a year and insurance would be cheap for me.

Here are the numbers :

14% Cap Rate

Total Monthly Income: $375.00

x50% for Expenses: $187.50

Monthly Payment/Interest Payment: $134.90

Total Monthly Cashflow using 50% Rule: $52.60

One benefit is this house is two blocks from my house, and is in really good condition.

What does everyone think about this deal? Regarding the owner finance; is it common to not allow prepayment? There is no way i would take this deal if i have to make thirty years of payments, i would pay off within 7. I am not sure what the common contract is.

Thanks,

Wes

[J. Martin]

30yr seems very long to me for seller financing. But not a bad rate..

If he doesn't want to drop pre-payments and you really want the financing (and you plan on holding), try to negotiate a declining prepayment penalty for the first few years when you expect it will have no impact on you.

If he's trying to invest money 30 years at 6% secured by real estate, send him my contact info and I'll give him a nice fat note secured by my CA property and give him pre-payment penalties for the first 10-15 years.. I'm a long-term buy and hold investor..