Seller Financing (SF) process is quite simple. Essentially, you just follow these steps:

1.      Review and understand the Seller Finance process. 4R Management suggests you read, “Streetwise Seller Financing” to learn more about this Real Estate Investment tool. (Use code: 2380) 

2.      Immediately advertise your rehab project as "Owner Will Carry” or “Seller Financing Available”.  4R Management can assist with the exact wording.  This will attract many more prospects than the traditional approach.

3.      Set the selling price equal to the appraised ARV (After Repair Value).  With seller financing option, you get top dollar for your transaction. 

4.      Create Notes

 Create a note(s) with perspective buyer 

Example:
Sales Price (appraised ARV) = $100,000
The deal:

Buyer’s Credit = 570
5% Down Payment = $5,000
80% First Mortgage Note = $80,000
Interest = 9.5%
Term = 360 months
Monthly Payment (P+I) = $673.00
15% Second Mortgage Note = $15,000
Interest = 9.5%
Term = 360 months
Monthly Payment (P+I) = $126.00
2 Year Balloon Payment = 14,491.00

Please review the Guidelines for Creating Seller Financing and Legal Considerations on Notes

5.      Sell the First Mortgage Note

This note can be sold at the closing for a discounted rate.  Discount rates will vary due to credit scores, down payments, interest rates, and terms.  In this example, we will purchase the note for $72,000 which is a 10% discount. 

Example:
Sales Price (appraised ARV) = $100,000
The deal:

80% First Mortgage Note = $80,000
10% Discount = $8,000
Cash Paid to You = $72,000
5% Down Payment = $5,000
Income Received at (or within 72 hours of) Closing = $77,000

6.      Hold the Second Note

You will receive a monthly income of $126.00 for 24 months, then a balloon payment of $14,791 from the Second Mortgage Note.  This translates to receiving $3,024 in monthly (P+I) payments plus the $14,791 balloon payment for a total of $17,8151 giving you a 16% rate of return. 

7.      Buyer Refinances

Generally, within the first six months, the buyer will refinance the purchase.  The refinance result in pay offs of both the first and second position mortgage notes.  For this reason, it is advisable not to include any pre-payment penalties in the original mortgage notes.