OK, that’s a clearer picture.
First off, asking $40K down is a non-starter …unless…
…the house is actually worth $200k and the buyer is capturing a $60K discount.
Shoot, I’d buy this deal for cash. Forget the down payment crap.
Meantime, if this house is worth closer to $200K, then it would be much wiser to sell it the following way, which a repeat of what I’ve stated earlier:
Sale Price: $220K
Down Payment: $22K
Balance Financed $198K
6%, 60/mos, over 30yrs, all due in 60/mos.
This way, you’ve captured $60k at time of purchase and created another $20k as a financing premium on the resale, totaling $80K in equity profits; all realized within five years. And all just for financing somebody.
Frankly, not knowing the comps is an amateur’s mistake. You’re effectively shooting from the hip, when you don’t better know the comps. That’s a gambler’s approach.
Meanwhile, you can bet that your buyers will know the comps. And professional investors will certainly understand the comps, or at least make informed valuation judgements, based on other criteria …including demand in the area.
And that’s somewhat to your advantage in that if you get an option, to find a buyer, or take over the payments, or otherwise, get in between the seller and end/user buyer to make some money, the length of time to find a buyer, and the feedback from your buyer’s themselves will give you an excellent indication of which way you need to adjust.
But you kind of have to pick the buyer to market to:
- Investor, or 2) Business owner
P.S. The current piti doesn’t seem out of line with a house that’s worth $200K, but it doesn’t seem atrocious for a house that’s only worth $100K.
Frankly, if this place was worth $150, in the mid-to-late nineties, it’s worth at least that much today, regardless if it’s tired looking or not.
Again, you don’t know your farm well enough to make solid, sure decisions. And this is tripping you up.
P.S.S. …If you were to finance a buyer, as an owner, and not as an ‘assignor’, and that first is scheduled to be paid off in less than 13 years, the principle reduction will go to your bottom line, not the original seller, or the end/user buyer. Why?
Because you now own the house, and the existing financing is now yours, and the end/user buyer’s amortization schedule is twice what yours is. So, you get to keep the accelerated equity pay-down.
So, if you simply decided to finance your buyer for 10 years (not making the original seller any promises of when they would be paid off), you get to keep/capture the accelerated equity pay-down. Why not?
You may have to lower the interest rate, or add a pre-payment penalty to the loan, to discourage the buyer from refinancing earlier. I don’t know.
OK, if I say more it’ll be too complicated sounding.