Am I asking the right question on a Duplex?

[Tyson Hosey]

I found a Duplex that is FSBO, and I'd like to do owner financing. But I want to make sure that they're understanding what I'm talking about. I know it's a rental unit already, it sounds like the current owner has a pretty good financial situation, because it's getting low rents (lower than market), the property is listed below market and a ton of repairs were just made to the property.. so I want to negotiate down a little bit for my own finances, and have the owner carry the note.

How should I be phrasing this to the owner? "carry the note"? "owner finance"? or just lay out the details of what the deal would look like, so there's no confusion over the terminology?

[Brett Weaver]

I think it depends on how knowledgeable the seller seems to be. If they're throwing around REI / financing jargon, then feel free to do the same. If not, maybe lead into the discussion with a question: "Have you thought about doing owner financing / acting as the bank?". Another good thing to ask is have they thought about the tax implications of the sale? It may be in their best interest to get paid over time and therefore paying tax over time.

Ultimately ask questions (if you haven't already) and find out what the seller really needs to get from the sale of the property. Are they just tired of managing it? Do they need a lump sum payment for a specific purpose? When? Once you find that out try to structure it so that your proposal solves their problem and is a win-win.

They may want out of the property now, but not necessarily need a lump sum payment for a few years.  They could receive interest only payments for a few years and then a balloon payment.  That gives you time to get the rents up to market which should appreciate so that you can get better financing and pay them off. There are many ways to structure the note.

I've been in similar a similar discussion with a retirement age friend of mine about his duplex.  He hasn't put it "on the market", so in my case the conversation is being spread over time, but I'm hoping to be top of mind when he does decide to sell.