Triplex owner finance deal analysis help

[Dave Laub]

It's been a while since I've spent time analyzing rental properties- most of my time involves analyzing fix and flips. I have some spreadsheets to do this, but I have an opportunity to get some owner financing on this deal and need a few sets of eyes on it to help.

Quick info:
Denver suburb triplex
Well maintained, with bigger ticket items replaced in recent years
Fully rented @ $1k per unit, probably below market rents
Nice neighborhood, good rental location, good condition
Asking $425k
Willing to owner carry 1/2, % yet to be determined

I know this isn't a huge cash flowing deal, but is it worth it to take advantage of the owner financing option? And if so, how would it best be structured?

[Joel Owens]

You are getting 3,000 in rents for a 425,000 price.

You are getting around 1,000 in rent for every 142,000 in purchase price. That is really poor numbers from a cash flow perspective.

3,000 rents X12 = 36,000 yearly expected gross / .50 costs = 18,000 NOI

10 cap is 180,000 purchase price and 5 cap is 360,000 purchase price. 425,000 is nuts.

Never would put 50% down on 425k. You can get lending at 75% to 80% ltv and have the seller carryback a 10 to 15% second thereby only putting down 5% to 15% of your own money.

I do not even know that it would appraise for such a low cap at 425,000. This is probably why the seller is financing with 50% down at a way overinflated price.

Owner financing is great if you can get it at the right purchase price, with the least amount down, with the best loan terms (high amort., low fixed rate, long balloon). If you have to overpay or agree to crazy loan terms just to get owner financed you need to pass on the deal. It's okay to pay a little above market for owner finance versus all cash but not a lot. This is the disconnect where sellers think with owner finance they can achieve this crazy price.