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Updated almost 6 years ago on . Most recent reply
![Zion Greenfield's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/309183/1621443326-avatar-ziong.jpg?twic=v1/output=image/cover=128x128&v=2)
Seller financing
Okay so, today I may have stepped in to my first deal in the real estate biz!
My mother currently leases a sweet little house in Asheville. When she heard that I was interested in becoming a real estate investor she suggested that I try to purchase the house she is leasing. I got her land lords contact information and called him up. I found out the entire history of the house and learned his personal life story. I also learned that he was in a little bit of a financial struggle and was getting back surgery the very next week. When I heard this I said that I would approach him again a few weeks after his surgery and we could try to make a deal then.
Fast forward three weeks to today. I called him up and was able to come to an agreement within about 20 minutes.
The deal goes so...
3 bedroom, 3 baths house with full finished basement and garage with full potential to make a 2 bedroom apt. out of.
Agreed price $200,000
He has agreed to carry the note for 5 years with 10% down
I was stupid and did not agree on an interest rate but I have decided that I will write it into the contract at 5% and see if he goes for it.
My mother currently rents the house for $1200/month. This is well under the market rate for this house at this location.
Based on my research after converting the basement in to an apt. I could get $1500 for upstairs and $800 for downstairs.
I believe that it will cost around $10,000 for the renovations. (Fortunately I already have most of the materials for adding the kitchen from my last job).
So...I will have around $210,000 into the house and will be receiving $2000-2400 in rent each month.
This is where I have gotten with this so far. Currently my agent is writing up a contract that I hope we will be able to sign sometime next week. She also had has a mortgage attorney lined up to handle the legal side of things.
One thing I am unsure about is...
How much will my monthly payment be? I just popped it into a mortgage calculator online and saw that with a 10yr mortgage I would be paying around $2000/month. In this deal he has agreed to hold the note for 5 years. It seems like with it being so short to pay off the entire amount I will have a massive payment. I feel like I'm missing something here but I'm not sure what...
Peace!
Zion
Most Popular Reply
Congrats on wanting to be an investor but it appears that you have left too many unknowns in this story. With your note, you should either have a 30 yr amort with a 5 yr balloon OR pay interest only for that 5 yr period. Second, you indicated that you are having an agent write up the deal after you seem to do all of the work. What is he getting out of this and how does that cost you $$$. Could you have done it without an agent and only asked 5% down thereby eliminating any agent fees?? Third, I know you are planning on making this a two family but is the area zoned for that? Fourth, you say you have all of the materials for rehab but experience will show you that rarely happens. Fifth, what yardstick are you using to know if you received a good deal? And lastly, and I do mean this with respect: Not handling the deal's parameters properly will hit you right between the eyes as sloppiness is never rewarded in investing.