Owner Financing and House Hacking

[Blaze Prax]

I may have the opportunity for owner financing on an unlisted home about 20 minutes out of Charlottesville VA, in Keswick. I would love advice on my next course of action, I have evaluated the property and believe the market value is about 300k. However, upon evaluation of the property, it will have a negative monthly cash flow at its market value and determined rental value. I will be converting the basement into an in-law for me to live in and will be renting out the top floor. I am thinking of offering 275k to create a negative cash flow of around $500 /mo. My thinking is, that I will have a place to live for only $500 /mo and I will be creating equity within the property. I believe I am being conservative with the rent in the area and want to know if I need to offer lower, walk away, or offer 275k. If I make an offer, what is the first step in the owner financing process, there is no realtor involved and I will definitely get a lawyer involved but do not want to do so until we have agreed upon a price. Your thoughts are appreciated!

[Bria Johnson]

Quote from @Blaze Prax:

I may have the opportunity for owner financing on an unlisted home about 20 minutes out of Charlottesville VA, in Keswick. I would love advice on my next course of action, I have evaluated the property and believe the market value is about 300k. However, upon evaluation of the property, it will have a negative monthly cash flow at its market value and determined rental value. I will be converting the basement into an in-law for me to live in and will be renting out the top floor. I am thinking of offering 275k to create a negative cash flow of around $500 /mo. My thinking is, that I will have a place to live for only $500 /mo and I will be creating equity within the property. I believe I am being conservative with the rent in the area and want to know if I need to offer lower, walk away, or offer 275k. If I make an offer, what is the first step in the owner financing process, there is no realtor involved and I will definitely get a lawyer involved but do not want to do so until we have agreed upon a price. Your thoughts are appreciated!

 Have you run the deal through a calculator? I know bigger pockets has some you can use. As far as the first step. I would say make sure it is a deal you want to pursue based on your objectives (cash flow , principal pay down, tax benefits, etc).

Depending on if the property is owned free and clear OR you are doing a wrap mortgage, I suggest speaking to an attorney to get the correct paperwork in place.I know you said that you will wait to get a lawyer involved, but I believe you need to have the correct paperwork ready to get it under contract.  If the seller agrees to the price that is half the battle, they would also need to agree to your terms and I am unsure the traditional P&L will be adequate for the deal.

I know for lease options my paperwork had to be created first because a traditional P&L won't cut it.  

All this to say  - this is only my opinion and not gold :). Make the offer and get it accepted. 
Good luck! Keep us posted.