Author Topic: For Sale Financing Available-HELP PLEASE  (Read 3649 times)

soccerluvof4

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For Sale Financing Available-HELP PLEASE
« on: March 04, 2014, 07:57:53 AM »
Here is my dillema and hope some smarter people than me might have some ideas...

I have a vacation property in the upper Midwest that sits on nearly 300' frontage on a lake. Its in a preferred area with great fishing, best access to snowmobile trails a person could imagine , great loacation etc.. BUT the market is depressed and so beaten down and I dont see it coming back anytime soon. I have had on market the last 2 years willing to take a loss because I own it out right and the monies plus not having to pay taxes and maintance and worry all the time , hell my investment return in theory i could go on many vacations and still come out ahead. This eats at me nearly everyday.

So right before the "Crash i stuck 100k in it building a mini guest cabin, another garage and upgrading bathroom , kitchen etc...so place is like brand new all sided logged to match on all buildings etc..

I have about 465k into and taking out the emotional compenant in it its worth every penny of 400k but there is just so many deals up there

1) Do i just blow it out and be done with it since its costing me about 10k a year for taxes , heat etc... I think if I listed for 349,900 I would blow it out the door.

or my other Idea is Seller to offer financing but I do not know anything about this.

Assuming I could then sell it for 385 and finance what are the things I need to consider and how would you go about doing it?  I was thinking 20 year or 15 year mortgage only but if somebody could do that you would think they could just buy the damn place.

I feel like if someone came up to me today and said here is 325k i would just take it and be done with it. I have sold all my toys up there and be ten years before I could use the place again.

I thought about renting it but to do something like that the first time I would rather buy a 4plex near by not 4 hours away.

HELP!

MDM

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Re: For Sale Financing Available-HELP PLEASE
« Reply #1 on: March 04, 2014, 09:24:41 AM »
Here is my dillema and hope some smarter people than me might have some ideas...

I have a vacation property in the upper Midwest that sits on nearly 300' frontage on a lake.
...
or my other Idea is Seller to offer financing but I do not know anything about this.

Assuming I could then sell it for 385 and finance what are the things I need to consider and how would you go about doing it?  I was thinking 20 year or 15 year mortgage only but if somebody could do that you would think they could just buy the damn place.

...

We have sold a couple of homes by land contract (aka seller-financed).  In both cases the buyers were landlords with multiple properties who could not get bank financing.  They were happy enough to pay an above-market interest rate and we were happy enough to receive it.  Cost for a local attorney to provide the legal language was reasonable.

soccerluvof4

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Re: For Sale Financing Available-HELP PLEASE
« Reply #2 on: March 04, 2014, 10:15:11 AM »
Here is my dillema and hope some smarter people than me might have some ideas...

I have a vacation property in the upper Midwest that sits on nearly 300' frontage on a lake.
...
or my other Idea is Seller to offer financing but I do not know anything about this.

Assuming I could then sell it for 385 and finance what are the things I need to consider and how would you go about doing it?  I was thinking 20 year or 15 year mortgage only but if somebody could do that you would think they could just buy the damn place.

...

We have sold a couple of homes by land contract (aka seller-financed).  In both cases the buyers were landlords with multiple properties who could not get bank financing.  They were happy enough to pay an above-market interest rate and we were happy enough to receive it.  Cost for a local attorney to provide the legal language was reasonable.

Thanks MDM but could you give me an idea on some math. Say you were going to sell for 375k. What would you look for a DP and for an interest rate? Would you do a 20 or push for a 15. I am 49 so hopefully will be around to collect on either. I am looking for some numbers.

Thanks

honobob

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Re: For Sale Financing Available-HELP PLEASE
« Reply #3 on: March 04, 2014, 11:32:06 AM »


Thanks MDM but could you give me an idea on some math. Say you were going to sell for 375k. What would you look for a DP and for an interest rate? Would you do a 20 or push for a 15. I am 49 so hopefully will be around to collect on either. I am looking for some numbers.

Thanks
The terms would be mandated by the market and your negotiating with your buyer.  Do you want a long term 4% loan when in 10 years you could get CD's at 12%?  You could amortize over 30 years but have a balloon payment due in 5.  You could lease option where they pay higher "rent" with a portion going to down payment if they exercise the option. 

I would just be concerned about giving title if the person had very little skin in the game.  I'd say a minimum of 20% if you are going to convey title.  It could be a lot less if you are holding title but you'd want enough that if the "buyer" defaulted after one payment you'd have enough of "his" money to deal with him.

MDM

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Re: For Sale Financing Available-HELP PLEASE
« Reply #4 on: March 04, 2014, 11:41:34 AM »
The most recent sale was a couple of years ago.  Unfortunately near the bottom of the housing market but the house was vacant (moved mom to assisted living) and 700 miles away.  I was looking for enough cash flow from the seller financing, together with her soc. sec. and pension, to cover mom's assisted living cost while leaving her current investments intact.

We asked for enough down payment to cover all closing costs (including realtor fee) plus a few thousand more - don't remember the exact percentage but <20%.  Interest rate is 4.5% (bank rates were ~3.5% then) over 30 years with a final balloon due after 10 years. 

Previous sale was in 1992.  Again down payment was just enough cover closing costs (this one was FSBO so no realtor).  Interest rate we received was 10% over 15 years with no balloon.  At the time, conventional 30 year mortgages were ~8%.  Buyers paid it all in 1998 when rates had dropped even lower but it was a nice 6 years.

As the seller in today's conditions, financing over a long time (e.g. 30 years) at least 1% over market (current 30 years is ~4.3% so 5.5%-6%) but establishing a final balloon in a relatively short time (e.g. 5 or 10 years) seems the best of all worlds if you can get it (as honobob mentions).


Blindsquirrel

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Re: For Sale Financing Available-HELP PLEASE
« Reply #5 on: March 04, 2014, 05:08:17 PM »
   Any chance of having a local person deal with renting it out on VRBO?  A 3 month rental season fully rented could bring in enough to make it cash flow neutral? Sound like the place would rent rather easily. Any muskies in the lake? :)

soccerluvof4

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Re: For Sale Financing Available-HELP PLEASE
« Reply #6 on: March 05, 2014, 05:10:49 AM »


Thanks MDM but could you give me an idea on some math. Say you were going to sell for 375k. What would you look for a DP and for an interest rate? Would you do a 20 or push for a 15. I am 49 so hopefully will be around to collect on either. I am looking for some numbers.

Thanks
The terms would be mandated by the market and your negotiating with your buyer.  Do you want a long term 4% loan when in 10 years you could get CD's at 12%?  You could amortize over 30 years but have a balloon payment due in 5.  You could lease option where they pay higher "rent" with a portion going to down payment if they exercise the option. 

I would just be concerned about giving title if the person had very little skin in the game.  I'd say a minimum of 20% if you are going to convey title.  It could be a lot less if you are holding title but you'd want enough that if the "buyer" defaulted after one payment you'd have enough of "his" money to deal with him.



Thank you both. Thats already some good insight!


   Any chance of having a local person deal with renting it out on VRBO?  A 3 month rental season fully rented could bring in enough to make it cash flow neutral? Sound like the place would rent rather easily. Any muskies in the lake? :)
The most recent sale was a couple of years ago.  Unfortunately near the bottom of the housing market but the house was vacant (moved mom to assisted living) and 700 miles away.  I was looking for enough cash flow from the seller financing, together with her soc. sec. and pension, to cover mom's assisted living cost while leaving her current investments intact.

We asked for enough down payment to cover all closing costs (including realtor fee) plus a few thousand more - don't remember the exact percentage but <20%.  Interest rate is 4.5% (bank rates were ~3.5% then) over 30 years with a final balloon due after 10 years. 

Previous sale was in 1992.  Again down payment was just enough cover closing costs (this one was FSBO so no realtor).  Interest rate we received was 10% over 15 years with no balloon.  At the time, conventional 30 year mortgages were ~8%.  Buyers paid it all in 1998 when rates had dropped even lower but it was a nice 6 years.

As the seller in today's conditions, financing over a long time (e.g. 30 years) at least 1% over market (current 30 years is ~4.3% so 5.5%-6%) but establishing a final balloon in a relatively short time (e.g. 5 or 10 years) seems the best of all worlds if you can get it (as honobob mentions).




You know the rental thing is a viable option. I probably could rent out for 1k-1200 a week but I dont know if I have the tolerance for renters as I am a bit OCD with my things. But maybe till I sold it but something I gotta consider because the taxes and maintance are stupid right now.

Our lake is 550 acres +/- Northern, Walleye , Bass and great pan fish. But 2 miles down the road puts you on 10,000 Acres made up of 6 lakes of some of the best Musky fishing around. In our county alone there are 1300 lakes so if you want it , you can find it when it comes to fishing. My dad has a place about half hour away and caught the largest Musky that year recorded (about 8-10 yrs back) and his buddy owns a Musky guide service. I am a snowmobiler (was) but Its definitely a fisherman heaven.

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Re: For Sale Financing Available-HELP PLEASE
« Reply #7 on: March 05, 2014, 05:51:28 AM »
In your shoes, I would consider getting my personal stuff out of there (family heirlooms and the like) and renting the place out over the summer.  Treat the house like a business.

Summer homes are not great for owner-financing.  The real buyers in your price range generally don't have trouble getting financing.  If the buyer lives in a property full time, there is more incentive for them to pay the mortgage.  If I wanted to sell and be done with the house, I would just lower the price and take the loss.  Next time I wanted to go fishing, I would rent a place.


soccerluvof4

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Re: For Sale Financing Available-HELP PLEASE
« Reply #8 on: March 05, 2014, 09:13:51 AM »
In your shoes, I would consider getting my personal stuff out of there (family heirlooms and the like) and renting the place out over the summer.  Treat the house like a business.

Summer homes are not great for owner-financing.  The real buyers in your price range generally don't have trouble getting financing.  If the buyer lives in a property full time, there is more incentive for them to pay the mortgage.  If I wanted to sell and be done with the house, I would just lower the price and take the loss.  Next time I wanted to go fishing, I would rent a place.

That is more how I am feeling about it (taking the loss and be done with it). And i could afford many rentals/vacations on the cost savings alone not to mention money in investments.

Thanks for your thoughts as well.

KBecks

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Re: For Sale Financing Available-HELP PLEASE
« Reply #9 on: March 10, 2014, 06:13:21 AM »
Trying it as a vacation rental might be interesting. There are books about setting up a home for vacation rental, and you will want to put in things that are not too precious and carefully screen the renters.  The season might be short, but maybe not for you with snowmobiling.    You can market into Minnesota too. 

Best of luck!
« Last Edit: March 10, 2014, 06:42:08 AM by KBecks »

soccerluvof4

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Re: For Sale Financing Available-HELP PLEASE
« Reply #10 on: March 10, 2014, 01:24:33 PM »
Trying it as a vacation rental might be interesting. There are books about setting up a home for vacation rental, and you will want to put in things that are not too precious and carefully screen the renters.  The season might be short, but maybe not for you with snowmobiling.    You can market into Minnesota too. 

Best of luck!

Having mentally preparing to sell the place now is pretty much as it would be sold. I have all the stuff i would want out of it so its fully furnished from furniture to dishes but nothing i would take. Over the course of the last year i have sold 3 boats, 4 out of 5 snowmobiles and a bunch of other stuff. So we will see but getting close here!  Thanks for your input!