Private Lending on an Owner Finance

9 Replies

Hi guys,

So I'm incredibly close to locking up my first Owner Finance deal but have questions about approaching my Private Investor for the Rehab costs.

Typically I'd say to my investor that they'd be secure by the note on the property but considering the Owner still holds Title in this case, how can I reassure my Investor he can be secured to a point and not in a second lien position.

There can be only one first lien.  If the seller does owner financing, they will have first lien.  All other liens will be secondary.

if your seller is going to do 90 or 100% owner financing, your private lender should be ok with being in the second position if they are only lending 10 or 20% of the purchase price. 

I would let the seller do most of the financing and try to pay most or all of the rehab out of your current funds if you can. 

While I love to do the no money down thing, the seller financing thing is great, especially if it is at no or 3 or 4% interest. I dont think private money is going to be below 10%.

You said the owner has title, so that isn't seller financing with a note and deed of trust, sounds like a land contract and that is not what you want if you are rehabbing the place!

Search "Contract For Deed" and "Land Contract" here on BP, especially my posts on the topic. Get a note and deed of trust, take title, your private money can take a second mortgage. Good luck :)

@Bill Gulley

what kind of financing are you using?  It can make a big difference in what you offer your rehab investor

The owner finance deals that I have done (2) involve going to an attorney, completing a title search and having the deed titled in my name.  Otherwise you are pretty much in a lease to own situation which gives you limited rights to the property no matter how  much money you put into it.  This is not a position most investors would take. 

If you continue with this option I encourage you to use an attorney experienced in creative financing and ensure that the proper documents are file with the Court in order to protect yourself and to "cloud" the title.  

Pulled this link from the internet regarding a description of contract for deed, which looks like what you are describing.  Seller holds the deed until you pay off the loan:  http://www.forrestergrouprealestate.com/Blog/Lease-Option-vs-Contracts-for-Deed

When you look at buying on terms in your state, I would buy "subject to" over 

installment sales contract or 

land contract or 

contract for deed or 

wrap around mortgage AITD

-Subject to gets you the deed, 

-Other creative financing has less control on acquisition 

Thanks everyone. Our seller wants to net a certain amount from the Sale of his home so in order to make our ROI target work, more of an Equity Split offering is what we're starting to work with. The thing I love about REI is the incredible network and fast learning curve. I appreciate all of the input

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