Owner financing deal - what is important as the seller

[Haim Mamane Palman]

For all the Owner Financing experts out there. I need your assistance doing a seller financing deal as the owner/seller.

I own a free and clear property and I had someone contact me and offered to purchase my property at retail price with me carry back a loan.

Her offer: Retail Price with 20% down (I asked for 30% down)

5-year-loan amortized over 30 year with balloon payment at the end of the fifth year. ( I asked for 3-year loan). She will get the deed, I will get a deed of trust with promissory note.

Interest rate 5-7%. What do you think is fair interest rate for this type of a transaction as the owner/lender. Should I ask for higher interest payment or points? I'm prepared to offer her lower interest rate if she willing to put bigger down payment.

The reason for me to consider such a transaction is the following:

- I invested about 47k into this deal and the buyer offer 66k which is at or slightly above retail price. So at the end of the 3-year I make a profit

- I get nice cash flow without dealing with tenants issues, don't worry about repairs or vacancy

- use the down payment money to invest in another property

- experience structuring such a creative deal

Do you have any tips for me as the owner? did I miss anything? would you do it if you were me?

Any advise would be much appreciated

[Bill Gulley]

Originally posted by @Haim Mamane Palman:

The house was listed on FSBO sites as well as on Zillow, Postlets and the like so she offered me full asking price and now I'm trying to get the best deal I can get as far as the terms go. Obviously, I want to get a higher down payment and higher interest rate with short balloon payment. Even though every deal is different and one can structure this in many ways, I want to get an idea of what are the "standard" terms for owner financing deal.

Over 1,500 of them I'd say what usually is there is 10% interest, 3 year balloon, but 5 is very close too, no pre payment penalty, 30 year on short balloons, 20 and 15 year amortizations on longer balloons, basically allowing equity to be established. Now, those are common terms, but things have changed, owner occupied if your note falls under the new laws, won't have a balloon in 3 years, 5 at minimum if it's a high rate (not interest rate) mortgage, you really won't be setting terms as she will need to qualify, the mortgage originator will do that for you and you decide if it's good for you. :)