Seller Financed Deal Analysis

[Jeff Bridges]

I am a Buy and hold Prince georges County, Maryland investor looking for help with this possible seller financed deal. I am scheduled an appt to view a unit this sunday 3/2 after speaking to a seller who is offering seller financing on a vacant rental SFR. Would appreciate recommendations on what I should offer during or after my visit to view the place.

5BR/2.5BA

Asking- $124,500

ARV- 120-180k

Repairs 20k- Kitchen and Bathroom cosmetics, roof, replace some stolen copper (These are subject to my inspection and contractor estimates)

Rent-1600-1800

Cashflow- $170-270/ month depending on rent

Cash on cash return- 10-15%

actual annual expenses- $3400 (tax, water/sewer/repair/insurance/license)

It's in a less desireable part of prince georges (capitol Heights) and definitely more prone to crime and lower income neighborhoods.

Seller Financing Terms Offered by Seller:

124500 asking/25k down/ 100k loan @ 10 year term/ interest free/

want $1000/month payment

Offer I'm Considering offering:

60k Cash offer (just low cash offer in case they want the quick cash)

OR

100000 seller financed/ 20k repair fund in escrow/ interest free for 10 year term/ first payment delayed by 2 months to perform renovation and place tenants(i'll ask;) )

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I'm not sure why they need the 25k yet, but will instead offer to put the 20k in escrow that will be used for repairs in lieu of down payment and show I have skin in the game.

The seller financing asking price is still somewhat high relative to value, but at a 10 year interest free loan, I'd be earning a little cashflow for 10 years, then at the 10 year mark, monthly cashflow will be 1000. Only requirement would be the 20k downpayment into the escrow repair fund. Is the initial low cashflow worth the 20k initial investment that really starts paying off at the 10 year mark?

Should I try to negotiate a lower purchase cost or is that not important because of the no interest financing? If I financed 80k at the bank, the payments with interest would be almost as much ....

Finally, I realize I'm not looking at very little appreciation but long term cashflow is most important as I plan to hold this for at least 10 years.... I just like to know if this looks like a worthwhile deal.

Thanks in advance for your thoughts!