Carry Back and Owner Financing?

I have what appears to be a motivated seller for a duplex going for about $185k. The rents pass the “1% rule of thumb”… I would buy this strictly as an investment and would not be living in the duplex - since it is out of state anyway. The owner is an investor and may be interested in creative financing. What options do I have?

Do you think the owner carrying a second mortgage would be in my interest? If so, how much would be reasonable, 10% or 20%? What are the true benefits for me to do this?

What exactly is the 1% rule of thumb? Havent heard of that one yet…

Hi there,

Well, I’m new to investing… But I’ve been told that if the rent made up at least 1% of the price of the property that it was a deal worth considering. Property = $185k. Rent collects $2k a month. 1% = 1,850.

Not to say that this is the only thing to consider, but it was mentioned as a good rule of thumb on considering a rental property.

It would benefit you if you couldn’t recieve a second.

The 1% rule typically applies to median SFH. If you have lower priced housing, then you can usually get more than 1% for rent, but if you have higher priced housing, you may not get 1%. Typically, you can get more than 1% for multi-family housing as well.


Thanks, I didn’t know that! Actually, as it turns out the property is much better off with no owner financing. I got the cost down $10k, and with the estimated rent I would make $300 positive cash flow after all expenses.

I worry though, since I am out of state… how much rent I will get… The place is vacant so I would need to fill it. Anyone know how to get good rent estimates when out of town? Internet doesn’t help since it’s a duplex and there are no properties in the neighborhood that compare… ug, it’s always something to worry about!!!

The first place to start is call a property management firm local the the duplex. most will be free with the average rental rate for the area.

I do several owner finance and prefer this method over most. The is much more room for negotiation in this arena than any thing else.

Thanks Medscan,

I did just that, I called a local property management company. The guy went out to the property, took pictures! And even knocked on the neighbors door to find out how much rent they were paying! All free! I think he’s spoiled me for dealing with any other property managers…