owner finance

10 Replies

Hey BP!

I have a customer that wants to do owner financing. I have a standard contract which has the blank line to fill in terms. If my client says that he prefers his attorney to make a specific financing contract with our agreed terms, how would I go from there? My contract still needed for my due diligence?

Thanks. 

Brian, 

Im an Investor (Newbie) and the seller would be owner financing the property to me. (sorry for the misunderstanding).

The seller has a house that he has not listed for sale yet. I asked him if he would consider owner financing me the property since he is not willing to go down on his price. He told me if the numbers look good he would accept.

 The seller inherited the house last year. He wants 280k for it but my calculations show me that it would sell for 265k. Similar homes in that area are renting for about $1,650/month . I would like to get the price to 265k and payments of $1,000  (30yr 2%interest) a month being that expenses  add up to about $400 a month. Do you think this would be a good deal on my side?  

Thanks, 

Cristhian.

When a deal is that close (market price to sales price) and you have to give him the price. Then I get the terms or walk away. If the rent has to be 125% of the payment (PITI) for me to consider it and I will only consider it if I had a lease2own prospect wiling to put up some front money and do the maintenance too-

So, if you are at $275K at 1K/mo- 60mo balloon PITI and can get a leease2own in at $295K at $1650 and they do maintenance with a 36mo. balloon- I will do the deal... I would have the lease2own party also go through a credit repair/mortgage person to help them qualify

@Cristhian Diaz

Personally I don't think it's a great deal.  You said you have to negotiate to get to $265k, what the property is worth.  So you're not getting any discount but rather paying full retail. BTW - make sure you get an appraisal to check that it's truly worth $265k.

Then on the rent side you really should be at $2k rent for a $1k mortgage payment, to cover all the extras: vacancy, evictions, capital expenses, etc.  Even the 1k mortgage payment is a stretch, as you're using a 2% rate to get that.

- Tom

im in same situation,i have a house that i owe $65k to the bank and its worth $180k and want to owner finance.can i do that,can someone help with the process.im willing to pay for the help.thanks 

@Richard Stephens - Yes you can. 

Depending on where the property is located, this is called a wraparound (aka wrap) or all-inclusive trust deed (AITD). 

Let's say you sell for $180,000 and collect $20,000 down. 

$160,000 financed / 240 months / 8% / $1,338.30 P&I

I don't know the remaining term or payment amount on the underlying loan, but let's say it's $750/mo maturing in 120 months.

Your loan servicer will collect payments of $1,338.30 per month from your borrower then pay $750/mo to the underlying lender. The remaining amount ($588.30 minus any servicing fee) will be forwarded to you. 

Most institutional loans and many private loans contain a "due on sale" clause which gives the lender the OPTION to call the full balance of the loan due. It's not unheard of but extremely rare for these to be exercised. 

Speak with an attorney about laws where you live and disclose the scenario to your borrower.

Hey Marco, I apologize for taking so long for the return reply I appreciate your input. I would like to purchase more properties to flip and keep some for rentals and spoke with a R/E agent and she said could sell for $200k or up. Would like to keep as a rental for passive but I like the thought of having $150k or so to further invest as opposed to like you said $20k down payment, not sure that’s enough capital to further invest. Utilize hard money on top of the $20k to buy more! My mind just spins trying to win win here, Ugh . Wish I had a mentor to settle my racing thoughts and actually accomplish my dreams. Any way, Thanks So Much