I have a property that I own outright...no mortgage. The tenant wants to buy and we have agreed on a sales price. I have directed him to some lenders but he is worried about his credit score. If he finds out that his credit is not good enough to get conventional financing, I was considering Lease Option(or Purchase) or maybe owner finance?? I have heard horror stories about having to foreclose on someone under Lease Option(or Purchase).
My goal is to sell the house quick as possible, cash in on big profit, and move on to the next deal. I know there are a ton of factors, but any input would be greatly appreciated!
If you want to cash in on a big profit than I would not recommend owner financing unless your tenant has a big downpayment. My other issue, how expensive and hard is it to foreclosue. If he doesn't qualify with "normal" banks that personally would send up a huge red flag!
On a lease option, would I have to foreclose if he didn't pay for some reason or would I only have to evict?
I understand that in owner financing, I would have to foreclose and then eventually repo the house through the court system. That would be a nightmare.
If you have a property in SC (Im guessing) I would:
1. Call my REIA in SC
2. Ask the president for a good seller financing attorney
3. Have the candidate see a RMLO (mortg loan originator), check on the ability to repay rule. See
4. if you choose the right seller financed buyer, i would not worry too much about foreclosure (e.g, a note and a mortgage - deed of trust).
5. If you are worried about foreclosure, do a lease purchase, charge 3% down, and create a sale and purchase agreement at the same time. It is like a delayed sale, but they are leasing first, for say 6 - 12 months.
No matter what, see a RMLO and an attorney..
Thanks Brian. Going to my first REIA meeting this month. Just never sold any of my properties before!!
Brian has hit the nail on the head! Make sure you get with a good RMLO and Attorney.
However, like Elizabeth Colegrove said, you won't be cashing in on a big profit up front in this type of deal. You'll be getting probably 10-20% of the purchase price as a down payment then making monthly income from there on. You will make a TON more in the long run this way, but if you're looking to cash out and move your money into another deal this might not be what you're wanting.
However, if you use that down payment to turn around and pick up more properties with owner financing you can start a domino effect that could really build up your portfolio!
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