selling with owner financing!
Hi guys. We are looking at selling a condo we own in galveston and we are advertising that we will consider owner financing. It is a vacation rental and will be sold either to an investor or someone for a second/vacation home. Traditional lenders won't touch these properties. Here are the numbers(rounded for simplicity) and a couple of question afterwards.
Currently we owe $35,000 on a privately held note at a local bank, 15yr note, balloons in 3.5 years.
selling for $60,000.
My goal for financing terms: at least %20 down, 6% interest on a 15 year note. This would almost get me everything back that I have put in it and then earn a $100 spread per month.
1. Am I correct to assume I would need to find a title company that would do a wrap on this property and risk my loan being called due? We do have the capability to pay it off.
2. How do you legally set up a note? lawyer? title company? pen and paper? Do the fees involved make it not worth it on such a small amount? Are there servicing companies that take care of all that for a fee and is it necessary? I'm pretty good with amortizations.
3. Foreclose (not that I want to)? I know how the Texas auctions work when buying. But how does it work when you are the bank. Are lawyers and trustees required or is it something a capable person could stumble through if they had to?
4. tax consequences? Maybe more of a question for a cpa but how in the world does it all work in these situations? When the property is sold am I considered paid out and owe capital gains on sale price less my basis (even though I never received the money). Then I set up a loan where the interest is taxable as interest income (regular wages or capital gains?)
5. Am I making this sound more complicated than it really is?
I know it would be easiest to sell it out right but I think we could get a little more money and learn something in the process. Thanks!