Real Estate Investor · Quinton, OK · Member since 2016 · 72 posts · 13 votes
I have consumed a ton of information on "creative" financing and now that I actually may have a deal that might fit the criteria for creative financing I'm not sure how to even go about it. Everything I've watched and read talks about how awesome it is to do but doesn't really dive any deeper into the subject matter. HELP. The property i have found the owner owns it free and clear and the property has been on the market awhile. They do not want to continue holding the property so this could be a good chance for me to get my feet wet with creative financing. Any insight would be greatly appreciated
@Gary Dale McKee is there a reason why you want to use "creative" financing over the tried and true methods? If the home is a good deal I dont' want you to walk away from it because you couldn't get owner financing. I'm assuming "creative" means owner financed.
If the owner owns the property free and clear they still might not be able to offer you owner financing on the property. They might need that cash right now. Also, if the house has been on the market for a while that means that other investors saw the house and passed. I would encourage you to stick to your numbers on what is a good buy.
But the only way to find out if the owner is ok with owner financing is to ask them or their listing agent. If they are, then it's time to negotiate the terms of their owner financing. I've seen anything from 0%-10% owner financing. Most owner financing transactions start well above a conventional rate mortgage so expect a rate of at least 7% or so. I hope this helps some but feel free to clarify and we can help more. Thanks!
@Andrew Postell I talked to the seller and they are open to non traditional financing options. They are asking market price for the property and the property at 140k or even 40k lower will not be a good deal and would not cash flow to my criteria. i am just trying to look outside the box and learn new financing strategies so that I do not miss a deal because it doesn't fit in with my norm of traditional financing.
@Gary Dale McKee Ok, I think I see what you are asking now. Then I would suggest to measure a seller financed transaction against the going rate for a traditional mortgage. So, if the going rate is 5% with 15% down then what is the upside of doing a seller financed transaction? If you can't qualify for a portfolio loan or a conventional loan...then the upside is obvious...but what if you could qualify for a conventional loan? If the seller financed transaction offered 0% down at 8% would that be better than a conventional? Since you need no down payment for the seller financed deal that could be a benefit to you. You could save on the down payment to pursue another deal and maybe the 8% is worth that benefit. If you need 20% down at 8%...well, the conventional is better. If the seller of the home is open to negotiate on the seller financed loan then try to negotiate something better than a conventional loan would offer. I hope that helps.
@Andrew Postell awesome job of reading between the lines. That is what I was wanting to know without knowing how to articulate it. I'm trying really hard to get my head wrapped around all the ways a particular real estate deal can be financed and my pea brain is struggling. The owner finance and subject to has really got my interest peaked and I feel like it could be a great tool to add to the old tool belt. Thank you for the information.