Seller Financed Small Multifamily Properties in Phoenix

By sonoran • December 7th, 2008

There are about 80 multifamily properties on the ARMLS but more in on the open market where the owner is willing to carry the not: these range from a $30,000 fix up to a larger $16,000,000 property and anything in-between.

In the current market where most lenders are overly cautious or with out funds sellers are more willing to agree to seller financing their properties and buyers have more properties to choose with that option.

There are 80 multifamily properties in the Greater Phoenix area where the seller is offering some type of owner financing and increasingly buyers are seeking this out.  There would probably be more such offers but existing financing gets in the way: unless you have a property that is free and clear or one that can be it’s not going to work: though there are other options.

Seller financing is very similar to a loan from a bank but the seller acts as the lender.  The major differences are that the note in most cases is held by the seller until paid- although these notes can be sold, the note terms are usually for a much shorter time then a conventional 30 year mortgage that you would get from a bank -but that does happen as well and the costs to organize seller financing are much smaller then going through a mortgage broker or bank.

As an investor you put down a down payment which varies – I have seen anything from $0 down up, though you’re more likely to come across around 10 to 30% as an initial down payment: you agree on a rate, type of payments – whether interest only or interest and principal: term of the loan – 2-5 years is typical: and several other points.  Otherwise the process of buying is the same.  The only caveat is that it would be wise to arrange payments through a servicer to make sure payments are accounted for.

As a seller there are quite a bit of benefits besides finding a buyer for your property.  A substantial down payment and sufficient credit and the ability and resources for the buyer to pay the remaining mortgage are criteria to look for but it’s up to you: you are the lender. 

There are tax benefits to seller financing as well.  In essence by seller financing you spread out the gain on your property over which every period the term is for plus the pay off.   Depending on your situation this can be of tremendous benefit and savings: this works for investment properties as well as owner occupied properties where there is taxable gain.  Seller financing is an alternative to a Sec. 1031 exchange.  While I can go into depth on the tax benefits this is the part where I step back and where your CPA or tax professional takes over to advise you.

When selling or buying  real estate with seller financing there are forms we use to make the process easy but you can make is difficult as well and there are additional steps sellers can take as well a buyers but I won’t go into those here. 

With difficult financing a seller carrying a note for a short or long term is an which may just help you achieve your goals. 

If you’re considering selling a home with seller financing we can can answer some questions and give you our input and experience.  We have used seller financing bother as buyers and sellers of real estate plus we have participated in such transactions as well. 

 

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