would you do this deal?

I have a brand new house with a loan of $260,000. P.I. $1700 P.I.T.I. $2500
This couple wants to buy the house (owner finance) here is the deal:

$20,000 down
$1700 per month for 36 months
after 36 months, refi in their name or start paying $2,500 per month.

I pocketed $30,000 at closing with this house.


Howdy Beaner:

I do not fully understand the deal as presented. How did you pocket $30,000 if they only put $20,000 down? Also are you paying the $800 shortgage per month for 3 years or am I missing something here too? You are on the hook for $28,800 over the 3 years plus tax and insurance increases. Althought the PV of $30,000 cash today is greater than the PV of the payments it is not that much greated. Do you have more profit once/if they refinance? If not you are basically swapping dollars. Not a good idea if you can get $30,000 elsewhere to invest. With my horrible credit I may do it just to get the $30,000 to invest into another property to buy and fix but I would be better off borrowing from a hard money lender.

??? I’m mystified by this one, too. Negative cash flow for three years? Is that what I’m seeing? And if they can’t get financing, you break even on the cash flow? Indefinately? This can’t be right! And what is the backend? How much are they paying…the sales price? $260,000.00 is what you paid for it, right?

I don’t get it.

Oh, to answer your question…no, I wouldn’t.


I think the better alternative actually if you want to deal with this couple is as follows.
You give them owner financing on a note dated 60 days out due and payable at that time this gives them posession. But wait, They give you a quitclaim deed to the property also 60 days out. Posession and owner financing gives them posession it can be a refi. and also serve as collateral if for some reason the property is overvalued or they can’t by some stretch receive financing you activate your quitclaim deed no harm done!

If you are going to do this deal, I would recommend the following:

-Make sure they have decent credit so that they can actually get a loan in 36 month’s and they can qualify with their income level.
-I would sell them the house for 5-10% higher than market value.
-I would refinance with an ARM loan to bring in some positive cash-flow.
-I would only give them 1 year, with two 1 year options to renew.

Just keep in mind that statistics show that only 40-50% of all lease options actually make it to the closing table.

Best Regards,
Jeff Adam

Hi Beaner: The terms of the deal don’t sound quite right. I suspect you may have inadvertently left something out of your explanation.