To get a lower price ask for a 2-3.5yr term. Even if you just had a bankruptcy that would be enough time for you to turn your credit around & refinance out. The big variable is where will interest rates be in 2-3.5yrs? Will they still be under 5.5%? That's the risk you take now.
OR you get on the right path to fix your credit now & buy in 1yr & be able to choose from any property that's on the market & not have to worry about finding an owner to carry. You then go & buy a foreclosure or short sale property & get the lowest end of fair market value to increase your cash flow & get that gap you want between "great deal & fair market value".
Realtor Since 1996
If you are using the seller to do financing, you can always pay more with each payment and lower your balance to increase your equity. We have great lenders to assist you now. You can get a 4% 30 year fixed on your home if you have the credit with only 3.5% down. Why would you do it any other way
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1. assignable lease purchase option for a 5 year term. You can then qualify for a refinance as well as an investment loan. Also, you can pull out if it is not to your benefit.
2. Seller financing with a silent second. Basically seller finances the remaining down payment needed to secure a traditional lender loan.
3. Have the seller finance you a 30 yr amortized loan and help the seller find people who will purchase the note from him.
Also, I just leased out a 1500sqft 3/2 detached in Woodbridge for $2650 (with a lot of interest) and I own a 1135sqft 3/2 attached in Woodbridge which is rented out for $2200.
This looks like a bad deal for everybody,including the brokers on both sides.
A. Paying mkt for an alligator in a declining market... The property you allude to could either be an SFR or a condo in Woodbridge. Let's assume it is a detached home with minimum taxes (1%) and no HOA, $500k price, 10% down.
Principal & interest is apx $2700, total about $3220. Rent is $2100.. monthly negative $1120... Not the kind of cash flow I assumed you meant.
2. Seller: 90% financing extended to you with NO mtg insurance in a declining market. High risk of default seem clear to me.
3. Brokers: Don't know how either one (or a dual agent) could counsel their clients to do either side of this transaction.
PS: You mentioned that you "invest for long term appreciation..."
It is usuallynot prudent to do this with short-term financing, "betting on the come" that you will be able to refinance 5 years in the future, when rates will likely be higher, and, with the pending demise of Freddie and Fannnie, financing may be quite difficult to come by.
The seller's desire for short-term return should not bind you to a possible capital loss.
What is the value to you of the owner financing in this time of low interest rates?
What are the terms of the owner financing (other than the 5 year balloon?)
Throughout the 80's I NEVER put together a transaction where there didn't exist a "back door" for renegotiation, depending on the market at the due date of the note.
I see no reason why it it would be prudent for you to fail to get renegotiation agreement now, as I expect interest rates to go considerably higher in the next 5 years.