seller financing with no cash flow?

[Mike Barry]

I was hoping to get the advice and pick the brains of some pros. Im a new investor with a couple properties already. I have not yet gone the route of creative financing, but have been exploring it. I have since found a property being offered as lease to own. My thought was to buy this and rent it as a buy and hold. The seller is looking for a $10,000 down payment and $1600 a month. The comps for this area will not support higher then $1600 a month so i would be at best breaking even not taking into account repairs etc...The main advantages i can see with seller financing such as this is not adding a loan thru a bank to come off my total of 4. Also the seller is looking for a sale price of $200,000 if im doing my math correctly I should have the home paid off within 10 years at $1600 a month vs a 30 year loan with a bank.

Im not sure if the risk outweighs the reward on this deal any opinions would be greatly appreciated!

Thank You!

[Ryan Dossey]

That is not a deal. It makes 0 sense for you to pay 1600 a month. If they want to do seller financing then you will need to structure a traditional loan with them. Set a term and an interest rate. They are hoping you are a sucker. You will constantly be putting money into this thing. Taxes, Insurance, and expenses. They are looking for someone who wants a lease option at best. 

[Tim T.]

Mike, with 0 to possibly negative cash-flow, and as a buy-and-hold strategy, "potential" appreciation is the only upside I can see for considering this deal. And that upside would need to be supported with solid comps and econ/growth projections for the area. Otherwise, you're better off taking the same 10k and putting it into a property that has positive cash flow.

[Micah Copeland]

@Mike Barry

It is looking like it is not a good deal from the information you have posted. If I was you I wouldn't worry too much about only getting 4 properties. The more you study and learn about real estate the more you will find ways to creatively take down properties. Plus, you can find way better seller finance deals out there. Do not get caught up on the fact that a seller is willing to seller financing. If you think about it too hard you will start to justify and tell yourself this is a "free" property. Unless a property is cash flowing I wouldn't consider it.

[Mike Barry]

well said thanks all for your input. I think the anticipation of acquiring another property is getting the best of me. I think I need to be more patient and not try to force a deal that is not there.

[Ryan Dossey]

I would tell the seller if they want to make 5 or 6% interest you would be interested in talking with them. Maybe offer a balloon if they don't want to hold the note for 10+ years. 

[Brian Gibbons]

What is existing financing on the property 

is a free and clear  or is there a mortgage? and if there is a loan what are the numbers on the payment and the balance and what kind of loan, fixed or arm ?