How do I offer owner financing?

Question

What are some good write ups on offering owner financing... the dos the don'ts... the risks and benefits (i'm guessing asking for higher value). Let say a property is purchased for $20k with all cash. I put $5k into its rehabb (not going to buy a disaster). Now fair market value of this house might be $40k... lets just say... but I can get $45k if I offer owner financing etc... Do i just need to have a Note and a Mortgage drawn up in my name and recorded? BTW my targetted area with be Ohio. I work for a bank and have connections with lawyers/title companys but owner financing isn't a type of financing where I'm from so they don't help me :-(

Thanks for the help!

Les Williams · Answer

Kinda like you answered your own question in a way. Dont be afraid of 
owner financing because it will earn you tripple what you paid for the property over the time fram you amortize the payments.  Owners who have deep pockets who can allow the property to sit and earn this money stay in it for the long haul. unless like you said something like foreclosure
happens. Then you start fresh and do it again because you still own the property. (: Me personally, I would advertize to people with marginal credit who can prove that the've paid rent for the last two years with no 30-60-90 lates.  These people wont skip out on you because they have no were to go and no bank will give them any money to buy because of their credit.  Now because your loan amount is so low, We put the rate at 12.5% with the option of paying interest only for the first 5 years. this will give them time to get their credit streight then refi and pay you off in 3 to 5 years.  5 years int only  on $45,000 at 12.5% is $28,125.  name one bank were you can earn this money on $45,000.

Travis S. · Answer

Good question...........

Wojtek Wlodarski · Answer

My question should have been... I'm going to be looking into purchasing a property from a bank.  The repairs will be cosmetical and done by myself and friends.  Carpets, paint, appliances, windows, roof (hope not!) if needed... yes it can easily grow upward of $5k i know.  But I don't expect to buy a home without seeing it.

So now lets say my home can appraise @ $40k easily.  Would it be in my interest to try and sell it for $45k with $5k down and financing of the remaining $40k @ 10% ($351/month for 30 years).

After 2 years of payments I get $8424 in payments and the principle is only knocked down $500!

Lets say the owner stops making payments... how do I foreclose on the property?

Can this drag out over a year?

Thanks!

(I know the best option would be to have the owner refinance out of the mortgage and just get my lump sum back and flip!)