All Forum Posts by: Rohan J.

Hi @Jay Hinrichs - what is the cutoff for an interest rate to be considered subprime? 

I have been speaking with an investor who outright owns 13 SFRs/duplexes, and wants to sell them off and retire. I'm thinking of asking him if he'd be interested in doing a seller-finance.. I just need to come up with terms that would make it a win-win for both of us.

Total value of all his properties is probably $500-600k. I'm thinking 5% downpayment with the remainder being financed at 6% over 10 or 15 years.

@Bob Derwin

@Tim Nelson

Thanks for the responses! I'm interested in hearing your thought process throughout your seller-financing deal.

How did you find it? Who did you work with to ensure you didn't potentially get scammed (e.g. what kind of attorney, accountant, etc)? Any tips on what I should make sure to look out for in the fine print? 

Would love to hear the details of your deals!

@Jacob Ghena Thanks. I especially like that last sentence... human nature definitely does not change so easily :)

@Diane G. I agree that typically the properties are overpriced (assuming everything else is legitimate). Unfortunately, I cannot continue to pay 20-25% down if I want to really grow my portfolio, so I'm just trying to assess a few different avenues to get creative with financing. I would be willing to pay a slight premium on price if it meant I could get something for <10% down. Other avenue I'm looking into is getting investors involved, but that would take a lot longer to get buy-in/set-up legal requirements/etc.

@Jeff Filali Sounds like you are in a very interesting and profitable business! 

Just so I understand this correctly, it sounds like you're buying properties at a discount, fixing them up, and then selling via seller-financing on 10-Yr notes? Essentially you're owning the profits at all parts of the lifecycle? Sounds amazing.

Do you typically buy all your properties with cash?

@Ruth Bayang Good points. I figured hiring a PM would take care of the problem of having to do anything to actively manage their properties, but I guess you do have to manage the PM as well :) 

Hey BP,

I've read a lot about the pros and cons about buying rentals through seller-financing, and I'm still unclear on why a seller would be interested in selling his property through this method. I'm trying to better understand this financing option more deeply right now in order to 1) figure out which type of homeowners I should target and 2) create the proper pitch that outlines the benefits of this financing, in order to make a less-experienced seller more comfortable with the proposition.

It looks like the main benefit of seller-financing is the fact that an owner would get payments spread out through 30 years instead of receiving one lump sum payment, but then my question would be: why wouldn't an owner just rent out their home instead? Wouldn't they accomplish their same goal of cash-flow by simply renting it out and holding onto it instead of selling it via seller-financing?

Would love to hear anyone's experience with seller-financing, and whether they would do it again. I'm afraid of being exploited in some way through this option, and obviously the last thing I would want is to get screwed in the end somehow and not actually receive the property. 

@Zach Zimmer what are your favorite places to invest in and around Akron? Also, is it a better market for SFRs?

Admittedly, I only visted for a week out there, but wasn't able to find anything I liked. 

Definitely interested in hearing your thoughts.

Cleveland (and it's surrounding suburbs) definitely have more opportunities for better cash flow. Just make sure to look at the neighborhoods closely!

Welcome! Akron is good but you need to be super picky about the area (I would only look at Cuyahoga Falls and Mogadore). 

Cleveland and its surrounding suburbs have more opportunities.

@Roman M. some great points you guys mentioned.

I like the idea of guaranteeing a 7% return and then breaking down a percentage equity after that, with costs and repairs coming from the rental pool. 
A couple quick questions:

1) What would be the most practical structure where we have all expenses paid for from the rental income? ( i.e. should we set up a little $3k emergency fund first, or whenever something really large needs fixing we then start taking it away from future rent, etc. ) Curious on what you guys think works best and is easiest to keep track of, from an accounting perspective.

2) What numbers are you using to calculate interest percentage paid? Example: lets say Bob is my investor, and he buys the duplex for me by putting down $20k (25%) + an extra $4k for closing costs, so all-in of $24k to buy a property. If I wanted to guarantee him 7% returns and then split 50/50, would it be monthly payments to him of $140 ([$24,000 * 7%]/ 12 mo), and then splitting everything above $140 and expenses?

I'm definitely trying to pursue this in a way where I can cash flow from this property asap (not until waiting for a sale), but would love to hear your thoughts on what that would look like. Splitting all rental income after he receives 7% and after all expenses are paid for seems pretty fair imo.