Seller financing gets thrown around a lot these days, especially with rates where they are and banks acting allergic to anything with more than two units. I talk to owners all the time who could use it, but probably shouldn’t… and others who have no idea it might actually be perfect for their situation.
Here’s the honest breakdown of when it’s worth considering—and when you should run the other way.
When Seller Financing DOES Make Sense
1. You'd rather not get smacked with one giant tax bill
Let’s call it what it is: capital gains hurt more when they hit all at once - and if you've owned the property a long time, that will likely mean you are in a higher tax bracket for the year.
Translation? You'll pay a higher percentage to the government. As an example, assuming you've owned your property for 30 years and you've paid off the debt and you decide to sell it for $1M you're going to pay 20% of that in capital gains which means you'll only see a check for $800k. You could use seller financing to only receive $500k this year and collect the remaining $500k over the next few years. That could bring you down into the 15% bracket each year which would save you $50k in taxes.
I’ve seen this save people from jumping into a higher bracket or messing with their Medicare premiums.
2. The only thing that matters to you is selling your property for the highest number
Terms have value—real value.
A buyer might stretch another $20k, $40k… sometimes more… if they can secure financing from you at a rate that keeps their monthly payments manageable. Especially with today’s lending environment.
I’ve seen sellers pull an extra 3–5% out of a deal just because they made it easier for the buyer to close. No magic there—it’s just math and flexibility.
3. You care about who takes over your building
Some owners don’t, and that’s fine.
But if you’ve held a property for 20 years, raised kids off the cash flow, and know every tenant by name… then choosing the right buyer matters. Seller financing gives you more control and options to give the property to someone you like.
A lot of long-term owners like that.
When Seller Financing DOES NOT Make Sense
1. You need the full proceeds to move on to the next thing
If the plan is to retire, pay off something big, or jump straight into a 1031 exchange (I have an article about that), you probably can’t tie up your equity in a note. You need all the cash, right now.
Totally valid reason to skip seller financing.
2. You want a clean break—emotionally and logistically
For some people, selling means “I’m done.”
They don’t want to check in on payments.
They don’t want to be the bank.
They definitely don’t want to hear from the buyer in year three because a watermain burst.
Even though being the lender is usually painless, there’s still a little involvement. If that annoys you, don’t do it.
3. Your income situation is shifting
Seller financing spreads out your tax hit. Great.
But if you know next year you’re taking time off, shutting down a business, or retiring, you might prefer to recognize the whole gain in a lower-income year instead of dragging it out. Timing matters.
4. The property is a heavy lift
If you’re selling something that needs $250k of work—new roof, electric, kitchens, all of it—seller financing adds risk. You’re betting the buyer can actually execute. If they can’t, that loan suddenly doesn’t feelso secure.
Buildings that need major renovation are usually better candidates for a straight forward sale.
THE BOTTOM LINE
Seller financing isn’t exotic. It’s just a tool—and a good one—when it fits your goals. It can boost your sale price, save you on taxes, and attract better buyers. But it’s not the right move if you need a clean cash-out or you don’t want any strings attached after closing.
