Real Deal #138 – Partial on Oregon Home

Welcome to Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions. 

A husband and wife decided to sell a rental home to their tenant using seller financing.  The property included a 2-bedroom stick built home, a detached studio, and a 1962 singlewide mobile home on just under an acre in a small town outside Eugene, Oregon. 

The tenant had been renting the property for over a year and wanted to purchase the home.  The seller and buyer agreed upon a sales price of $110,000 with $11,000 down.  

The balance of $99,000 was financed by the seller at 10.375% interest per annum payable in monthly installments of $896.35.  The note was all due and payable in 5 years requiring the buyer to refinance and payoff the balloon payment of approximately $96,735 in 60 months.

The closing took place through a local title company.  The property purchaser received a Warranty Deed from the seller at closing and the seller received a Note and Deed of Trust from the purchaser outlining the terms of repayment.

The seller received the $11,000 down payment at closing (less costs) but desired additional cash.  The seller contacted a local note broker to see if an investor would be interested in buying some of the payments.

The buyer had a few credit glitches that were of concern to the note investor but the seller felt confident they would pay based on their timely rental payment history.  They agreed upon a partial purchase where the investor bought part of the remaining payments.  This lowered the investor’s exposure or risk but still provided the seller with some cash today and the right to future payments.

The seller received $47,000 in proceeds from the investor.  The investor purchased the right to receive an amount equal to the remaining 59 monthly payments of $896.35 plus $31,474 of the balloon payment.   After the investor received their portion, the seller was entitled to receive the remainder of the balloon payment or approximately $65,261 (full balloon of $96,735 less investor’s balloon portion of $31,474 leaves remainder of $65,261).

The terms of a partial purchase are outlined in a Partial Purchase Agreement, which takes into account important issues such as servicing, early payoff, and/or default.  Since the agreement outlines the legal rights of both parties, sellers are encouraged to seek review by competent legal counsel. 

Real deals are based on actual transactions completed within the past ten years. Market conditions change frequently resulting in pricing and underwriting changes by note investors.  Work with qualified professionals when creating new notes to obtain accurate and up-to-date pricing and investment parameters. 

About Tracy Z

Tracy combines her knowledge of cash flow notes with the power of marketing online to help grow your business! She can be reached at 1-888-999-7905 or at Exposure One Marketing.


  1. Richard White says


    I was trying to calculate the investor’s effective interest rate. Here’s what I did:

    1) Multiply the monthly payments by 59 to get the total amount payed by the buyer. This was $52,884.65.

    2) Add to that the $31,474 which was his portion of the balloon payment. This gave $84,358.65.

    3) Divide that figure by 59 to get $1429.81. Consider this to be the “effective” monthly payment.

    My mortgage calculator tells me that the investor’s effective interest on his $47,000 outlay is 26.39%. Did I figure that correctly?

    Best regards,
    Richard White
    Del Valle, Texas

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