Thank you in advance for sharing your expertise.
I'd like to buy a residential home for myself but I'd like to see if I could get owner financed, either whole or partial. I am thinking to provide two offers, one with jumbo loan and another with owner financing. I figure that if the owner has a current mortgage that perhaps I could offer to get a mortgage for payoff of their mortgage and then owner finance the remainder? Is that possible?
Also, I am wondering if offering a 4% fixed 30 year for owner financing with 10% down is reasonable or laughable? The current owner is recently widowed and ~70+ yrs. old. Since current 30 year bonds are only providing 3%, I would like to know if this type of offer makes sense or is way off.
What would you do? Is there more information I could provide?
Also, part of the reason for doing this is to keep some of our down payment and mortgage costs/options available to purchase small multi-family. Balancing wife's nesting needs with my long term goals of real estate investing.
Noel the Newbie :)
The thing about owner financing is that you need to understand the motivation of the owner. There are many reasons to offer owner financing and each one will require a slightly different deal.
To that end, I would ask you why would the owner take your deal? What would be the benefit to them over a standard offer? You need to answer these questions first. I suspect a 70 year old man will not be interested in a loan with a 30 year time frame.
My thought is that it provides income that is better return than bonds or CDs. I also felt that the time frame wouldn't really matter because his children would inherit anyway. I could see more that maybe children would want a lump sum inheritence but maybe it would actually help from a tax perspective because it wouldn't be a lump sum and therefore would carry smaller impacts from an estate tax standpoint, depending of course on estate size, etc.
That’s reasonable assuming he has children and wants them to inherit. However he may need the money to pay for his next living situation or even his living expenses. It is common for people homes to be their most valuable asset. I honestly suspect your offer has little chance of success but at the end of the day you never know until you ask and it never hurts to ask. You may start the conversation just by saying “ have you considered carrying the loan for any length of time?” I often ask “how much cash would I need to bring you for you to be comfortable carrying the loan for a while?”
You are likely going to hear no. It is almost always no. In fact even when you hear yes the terms that usually follow are so bad you are going to say no! So don’t be afraid to hear no and just put it out there. This isn’t meant to be discouraging in a way I find it very freeing.
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