Letter to seller - Owner Financing: Please Review!

[Kyle McCorkel]

I've been pursuing a potential owner financed package deal for three properties, 6 units total.  The seller is working through an agent.  From what I know so far, the seller either owns the properties free and clear or has a very low mortgage balance.  Seems like a great opportunity for seller financing to me.

Anyways, the selling agent asked me to "write something up" so that she can present it to the seller.  I am not ready to make an offer yet...but mainly want to gauge the seller's interest in doing owner financing.

BP - can you please review my writeup below and let me know what you think? Any advice on how I can be as transparent, honest, and non-threatening as possible would be greatly appreciated.

_____________________________________

Dear Seller,

My name is Kyle McCorkel and I’m a real estate investor. My wife and I live in Hummelstown. I’m interested in your rental properties in ______, and I wanted to begin the conversation about how we might be able to come to an agreement allowing me to purchase the properties. As an investor, I must find great deals with great financing in order for them to be worthwhile for me. Since you are trying to sell multiple properties, I’d like to gauge your interest in selling them as a package deal with owner financing.

In case you are not aware of how owner financing works: this is a situation in which the seller of the property “carries the mortgage” for the buyer. The seller and buyer can negotiate on all terms of the loan, such as down payment, interest rate, and amortization schedule. After the property is purchased, the buyer pays the seller in monthly mortgage payments, just like you would pay a bank in a conventional financing situation.

The benefits of owner financing for the buyer are that you can have more control over the terms of the loan. This can allow the buyer to turn a good deal into a great deal. The benefits for the seller include being able to spread out the tax burden of the sale and to gain a passive stream of income every month.

I encourage you to seek council with your attorney and/or tax accountant in order to fully understand how owner financing would affect your specific situation, and if it is right for you. It will also be important that you become comfortable with me as a borrower. I encourage you to perform credit checks on both myself and my wife. You will find that we both score very high, around 800. We are responsible with our finances and take our debts very seriously, and we usually choose to setup automatic payments to ensure we never miss a payment.

I’ve put together a demonstration on the next pages of some example terms and example payment schedule. To be absolutely clear, this is not an offer. The terms are not my offer terms, and the purchase price is not an offer price. This is just to demonstrate what an owner financed deal might look like.

Please let my agent know if you would be interested in selling all three of your properties in an owner financed deal. If that is the case, then I would like to conduct some due diligence on the properties before presenting an offer. This due diligence would include an initial walkthrough of each property (I’ve only seen _________ so far) as well as verification of all income and expenses.

Please take all the time and precautions necessary to fully consider my proposition. I look forward to hearing back from you.

Sincerely,

Kyle McCorkel

Example of owner financed deal: For Demonstration Purposes Only – this is not an offer

Purchase Price: $100,000

Down Payment: $5,000

Loan Amount: $95,000

Annual Interest Rate: 4%

Amortization Period: 360 months

Number of Payments: 120 (balloon payment after 10 years)

Monthly Payment	$ 453.54
Balloon Payment	$ 75,299.00
Total Payments	$ 129,270.26
Total Interest Paid	$ 34,270.26

(amortization schedule follows)