Real Deal #152 – Owner Financing Mixed Use Property

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

When a property is used for both commercial and residential purposes it can be difficult to obtain traditional financing.  Owner financing provided an alternative to the traditional mortgage loan on this mixed-use property in Oklahoma.

The real estate sale involved one lot improved with an 1800 square foot 3/2 residence and an additional 1200 square foot commercial building used for a key and locksmith business. The buyer already leased the property, living in the home and operating the business. 

The buyer had first purchased the business itself from the seller seven years prior for $238,000.  The seller had offered owner financing on the business and the buyer had already paid down the business note to $62,773.  The buyer now wanted to purchase the residence and commercial building for $100,000.

Since the buyer had already been paying timely on the business note the seller agreed to sell the real estate portion without a down payment.  The existing balance on the business note of $62,733 was combined with the real estate purchase for a new note balance of $162,773 at 9% interest payable in 60 payments of $3,378.90 per month.

Another 4 years passed and the buyer got behind in their payments.  The remaining balance was now $67,897 so the seller agreed to lower the monthly payment to $2,087.77 but increase the interest rate to 15 percent.  The buyer could afford the new payment arrangement and was able to pay timely again.

The seller then experienced a need for cash today rather than payments over time so elected to sell the note balance of $60,226.42 to an investor. The seller received $48,224 cash now for selling the remaining 36 payments, the note broker earned a referral fee, and the investor purchased a high yielding note at a low investment to value.

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.

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