“Know what you own and why you own it.” Peter Lynch

I recently listed a 7 unit building in Torrance which offers owner financing. How does this benefit the new buyer as opposed to traditional financing?

WHAT IS OWNER FINANCING? This is financing on a building carried by the current seller. It is usually at a lower rate than traditional financing and saves time, which can be important if you are nearing your 45 day identification period for a 1031 tax deferred exchange.

WHY IS THE SELLER OFFERING THIS? Usually seller financing is offered when a seller is not exchanging into another building and doesn’t need all cash. It  gives the seller an opportunity to make additional income from the building he is selling, in the form of interest payments for the next several years or maybe even longer. The security is a building he has already owned, and with a good down payment it should be a secure investment with a good return.

WHAT ARE THE ADVANTAGES FOR THE BUYER? There are a number of advantages for a new buyer. For one thing qualification will be minimal. The seller will usually ask for proof of your net worth, credit and income, but it will be much less than a bank would ask. Additionally, you may be able to pay the payments of your new loan “interest only” which allows you to pay principal if you like but doesn’t require you to do so. Most banks will require payments consisting of principal and interest. Interest only payments can keep your monthly expenses lower, which is always useful. Also the appraisal will not be needed, unless requested by you, as the buyer. There are lots of costs which can be avoided including points, processing fees and appraisal fees, just to mention a few.

PAPERWORK I always recommend consultation with your real estate attorney and your CPA to make sure you have a professional to check that you didn’t miss something before the note is signed. This goes for both buyers and seller just be be on the safe side.

If you are interested in my new listing, it is located at 1636 W. 219th Street in Torrance. It is 7 units- (2) 3 bedroom, (4) 2 bedroom and (1) 1 bedroom. Feel free to give me a call or email me for an offering circular on the property.

“Don’t give up. Don’t ever give up.” Jim Valvano

What we at PRS PROPERTIES CAN DO. We can give you a good idea of the current value of your building. We can suggest changes you might want to make before sale to give you an idea what type of building you would be able to exchange into. You may decide to stay in the rental business. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparable in the area of your properties, so that you know what rental values are in your area. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities. We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We are currently looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We can offer a 7 day escrow and all cash at closing. Give us a call. We have also put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are currently in 1031 exchanges and need to identify a replacement property before their 45 day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.