I have a duplex in a crummy neighborhood, but with awesome rental income potential as there is a shortage of rentals available in the area. I am totally uncomfortable going there-even to do painting, cleaning, etc. myself, so I don't want to be involved with any more repairs or upgrades. I've had it for sale for 2 months, and nearly everyone who has contacted me about it is looking for seller financing. It's only a $15K sell and I'm ready to be rid of it-but seller financing feels very risky to me.
On a note that small, should I bother with the expense of getting a third party servicer for payments and escrow? If I'm the loss payee on the HO policy, will that insurance company notify me if the buyer drops his coverage? How much and how many months would it take to foreclose if the buyer walks away?
It feels like a lot of risk--I'm pretty trepidatious about new things. I know it could be a way to squeeze out some more money from the house, but the worst case scenario keeps creeping to the forefront...that I'll be out money and be stuck doing this all again in a couple years.
Any advice will be gratefully accepted!
Thanks for your reply. Quick, too!
I own it outright-and the offers I have gotten have been from people who have very little money to put down ($700-1500). The last offer is from a guy who has the maintenance skills to be able to handle the repairs that will spring up, but I'm concerned about him being able to make payments if a unit has vacancy or if he has to evict a tenant for non-payment.
Ideally, I think it'd be wise to use a third party servicer for payments and escrow expenses, but that's an extra cost for buyers who are only interested in the deal because they don't have much money to start with. I see much going wrong that would make a buyer default on payments and I don't know how much a foreclosure would cost me (thousands?).
@Rayna Barnett keep in mind that Indiana is a judicial foreclosure state which means that a foreclosure needs to be approved by the court. Judicial foreclosure can take a long time. It's not like a deed of trust.
Like with any investment, there are always going to be risks, and I think it really comes down to the kind of risk you are willing to tolerate. In this case, perhaps for your peace of mind and to increase the chances that the tenant-buyer will not end up having to be foreclosed on, make sure to secure a decent down payment. I think @Brian Gibbons is on the right track. You could do a 5-7K down, with a 5 year balloon amortized over 30 years, and an acceptable monthly payment.
Also, like he asked, you need to take into consideration if you have an existing mortgage on the property.
I think you should go for it! It'll give you experience and help you overcome future hesitation a bit :)