So I have an interesting idea that I would like an opinion on. I am a realtor in the Pittsburgh area and I just met a client who really wants to buy a home, but has a very low credit score as well as minimal money for a down payment. This woman and her husband are extremely nice people and apparently have a had a pretty tough past. For this reason, I would love to help them achieve their dream of home ownership in any way that I can.
Just today, she sent me a $38,000 dollar house which is in a decent area, but only able to accept cash and conventional financing which they are obviously unable to do. My thought/question is this...if I could purchase this property in cash myself and offer them an owner financing situation, what would be the best way to structure this? I do some investing myself on top of my real estate business, but have never done anything with owner financing. How would you set up a deal where they do not have to pay much down and I am able to make a reasonable cash flow (nothing crazy obviously on a $38,000 deal).
Anybody with experience in this area is welcome to chime in!
After you buy it you would close again with your client based on the owner financing agreement. Your closing attorney draws up the mortgage and note based on the agreed terms with the client. There would be an amortization chart showing the full schedule of the term of the owner finance deal. It's fairly simple but a closing attorney would need to help you through it. They don't have to pay anything down if you don't want them to. If it's your owner financed deal then you set the terms with the buyer.
Awesome thanks for the reply Eddie. So, for example, if I wanted to make it as simple as possible meaning no balloon and no down, would this situation make sense:
I purchase at $38000
I set repayment period at 5 years based on a 50k future assumed price.
I set an interest rate of 10 percent (these are all just hypothetical mind you)
50/5 = 10k a year in payments from tenant
10k @10 percent interest makes it 11k a year in payment
11k/12 months = 917 a month
So after 5 years, the house is theirs and I have made 17k (minus associated costs). Is this a logical train of thought? Reasonable numbers? What would anybody here recommend doing differently?
*** I am well aware of the monthly costs of managing the property/maintaining. These numbers are intended to be as basic for now as possible just to better understand