Owner Financing!
I want to make an offer on a 3bed 2bath brick ranch that has no mortgage. The current owner inherited the home from its only previous owner(his mother) and as per our phone conversation might be interested in owner financing the FMV is about 105k he is asking 96k but I think would be more flexible if I could show him a creative offer. I was thinking of offering 85k @ 8% intrest only with a balloon of 85k due in 5 years. Though he may want a down payment. He wants to give the money to his kids. I want to L/O the property and have a positive cash flow. How can I structure my offer to accomplish this?
Your offer isn' t completely clear to me. Are you looking to for owner to carry back $85K at 8% with a down payment of $11K? 8% seems to be a high interest rate for a seller carryback. You may be able to find institutional financing around 6%. Whether it can be lease optioned with positive cash flow will depend on what rents are and how you structure option consideration. I am not sure why you want to offer such a high interest rate to the seller on a carryback.
I am not sure of the genesis of "avoiding institutional financing at all costs". Tnere is a list that includes institutional financing that is associated with TCI. I do know one person that claims never to have use instituional financing and is proud of it.
Your cash flow will be much better if you take advantage of the low institutional rates. I just got a 90% loan at 6.125% interest. Depending on the market in your area you might use institutional primary funding and then have the seller carry back a small note under very favorable terms. I have some seller carrybacks at 3 or 4 percent that go out to 9 years. You may be on thin ice if you have a large note with a 5 year balloon if the interest rates are way up at the time you need to pay off the loan.