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Don’t do this, make the buyer get a conventional loan and be done with it
Coach
not sure why anyone would ever want to do this.
- you can get better returns in the market
- if the dude doesn’t pay, you have to go after him yourself and legal fees are expensive
- time value of money and cash is king
Why are you considering this option?
Too much risk if buyer defaults or is behind on payments.
Close your transaction and be done with it. Cash now is better than cash in the future.
My dad has done several of these. I’d consider it in some circumstances (like if it was a rental and my tenant wanted to buy but couldn’t get a loan currently and expected to be able to eventually).
I would want to get above an market interest rate - so like 7.5% on a 1-5 year loan for example. You could let them have a 30 year amortization or just pay interest only. Not a huge difference to you either way (and interest only is easier to track). Don’t do a 10+ year loan. You want the option to reevaluate terms and chance the rate or force them out eventually.
Also get a down payment. Or ramp up rate even higher. That way eventually if you foreclose you’re just back to having the property you owned before but you’ll get some return for your trouble (and remember they may not maintain it well so getting it back doesn’t mean in great condition).
I’m in a owner financed deal. I’m the borrower tho. Not the seller. I pay seller each month and I haven’t had any issues.