Re: What interest to Charge on Owner Finance - Posted by gerald(tx)
Posted by gerald(tx) on October 26, 2005 at 14:29:10:
Just a simple answer, X% would be meaningless. You can adjust either the principal or the interest to suit your case.
You are going to make up a new note, a “wrap” (or at least an equivilent, depending on how you structure it.) So the thing to do is work backwards. i.e., how much is a reasonable payment for this house in this neighborhood. In your case, you have estimated $2100.
Since you will be making the note, you can sturcture it anyway you wish. The variables are:
1= how long will it be before your TB cashes you out?
2= what is your TBs hot button - is he shopping price or payment?
3= what is your TBs record of reliability? Does his past record indicate he can cash you out on the time frame?
4= do you really want to sell the note immediately? If so, find a buyer beforehand and structure it according to what the note buyer wants.
Weighing each of these, you can adjust the variables to fit your particular situation.