Here's a way that works for me
In another thread someone asked me to explain the process I use for my seller financed flips. I've posted it before but it's worth repeating as others may want to use it too.
The keys to making this successful are:
Buying for CASH
Picking the market segment
Offering attractive TERMS
I've been doing this for over ten years, the first 6 in Houston, the last 4 in a small town west of Austin. Prices in the MLS here range from $49.9K (4/2, stick built, older frame house, inside the city limits to about $3.6MM, 6/5, lakeside, boatlift,hot and cold running maids, etc.
I prefer to buy in the low $50K and not do ANY work. I can usually spot something that really lacks curb appeal and do the cosmetics in a weekend. Even in the lower end of the market CURB APPEAL gets them out of their car, kitchens and baths CLOSE THE DEAL.
Here's a couple of recent projects, both bought off the MLS. Paid $50K for one $52K for the other. Spent about $30 and 1/2 day on the $52K one and spent about $150 and 2 1/2 days on the $50K. Sold the $52K for $67 FIRST DAY IN THE PAPER. Sold the $50K for $73K FIRST DAY IN THE PAPER.
My ad says "3/2 (or 2/2) owner will finance with $2000 down payment".
Buyer has to bring the following to closing
Balance of his $2K (I usually get $1K at contract signing)
One year of PAID homeowner's insurance
Three months of taxes and insurance payment that I WILL ESCROW
$350 for DOCUMENT PREPARATION. I have all the docs stored in my computer and just update them for my deal
The most recent one was the one I paid 50 and sold for 73, I charged them 8%, 30 year amortization, 7 year balloon
But I'm not making 8% on my money, I'm actually making about 12.75%. Because they're paying ME $521/month on the $71K they borrowed. But if you figure my return on the $48K I've actually got in the deal it's the equivalent of a 12.75% interest rate.
I have a prepayment penalty for the first 2 years (6 months interest). I like to have them balloon in 5-7 years because I'm in my late 50s.
That's how I do it. I've done it on much more expensive properties because there are people in every income bracket and home taste that aren't bankable throught traditional means. I just prefer the end of the market I'm doing for quick sales.
all cash