I moved from my primary residence and rented it out while I moved away for my job. The renter wants to buy it, but the bank wants 20% down and he can’t afford that until next year. I’m thinking it may be a good option to offer him seller financing as I can pay off the home and then collect his mortgage payment instead of rent. The home is worth about $460k and rents for $2200 (minus property mgmt. @10%). If I sold to him at $460k and he puts 10% down and pays me say 8%, he can buy it now, I avoid a realtor and all the expenses on the rental. I would collect ~$3000 per month and he’d likely refinance next year and pay me off. If he doesn’t, I’m getting 8% on my money which to me seems reasonable.
I’ve never done this before so hoping someone can sanity check me here and let me where my blind sides are. Seems like a good deal for both sides.
Dodd Frank will have much to say about financing the property to a owner occupant. My suggestion is to either rent to him until they can get financing, then sell it. Or recommend he look into FHA, VA or other bank financing that doesn't require 20%.
Run it by your lawyer first to check on the legality of this. If it is legal I say run with it, if not I agree with @Bryan H.
I like to look at seller financing alternatives.
First here is my Dodd Frank Summary
Think about using a ROFR right of first refusal
Also I have used a Contract for Option
If you want to help your renter, use a 1003 app and have him see a mortgage broker
Best of Luck!
Thanks folks. I never thought of the Dodd Frank implications. I'll do more research on that piece. At least it sounds viable financially, just need to confirm the legality.
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