Offering seller finance to current tenants

San Diego, CA · Member since 2017 · 4 posts · 1 vote

I own a few properties in Memphis and am currently listing them for sale, one of the properties has had the same tenants in it for 15yr and they have always paid on time. The house is valued at less than what a bank would loan. I am considering a 5yr seller finance at 6% with insurance and taxes included their payment would actual be about $10 cheaper than their rent.

It seems that I would have less responsibility from maintenance and management fees and could actually net more, and a family that probably never thought they could own a house can become home owners.

Contract would be written up by a lawyer and the loan secured by the property.

Question?: Is this a win-win situation or is there other aspects that I'm completely not seeing or considering? Does this seem like a fair deal to the tenants? To me?

1 Reply

11 views

Most Popular Reply

Douglas SkipworthBusiness Member

Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes

Hi, @Lee Eckert and @Tristan H..

If your tenants are interested in home ownership and your willing to help them by selling and carrying the note, I think that's a great opportunity for both parties. I'd just make doubly sure that the tenants are truly ready for the responsibilities of being an owner rather than a renter.

That said, I have bought many houses here from foreclosure and with seller financing. Having been through both processes dozens of times, the event of default is not scary at all. There are several really good real estate attorneys in town who can help. Plus, if you ever have questions about it, I (and several others) would be happy to talk you through it.

The biggest risk is that you take back the house and it's is worth less than the borrower owes (primarily due to deferred maintenance). Hopefully, periodic inspections can prevent this.

Best wishes and please keep BP posted!

Investor's Guide to Memphis Real Estate

View Page

2 Reply

See this reply in the discussion

3 Replies

Jump to latestLatest

Sort by

Dennis Weber
Real Estate Investor · Indianapolis, IN · Member since 2014 · 316 posts · 165 votes
9y
I like the idea of selling to a tenant and holding the note. I wouldn't think that $10 a month would entice a tenant to buy, though. Maybe you could get a down payment or extend the term to cut their monthly expense by at least $50.
0 Reply
Tristan H.
Rental Property Investor · Memphis, TN · Member since 2013 · 56 posts · 29 votes
9y
Lee, PM me. Maybe we can compare notes on selling to tenants. We own several SFRs in Memphis and have a tenant who has requested to buy (and whom we are ready to sell to). I have spoken to a couple closing attorneys re: drawing up the documents for owner financing. The only issue we are having trouble wrapping our heads around is having to deal with foreclosure in the event of default. Anyone here with experience in TN, preferably in Shelby County, providing owner financing?
1 Reply
Douglas SkipworthBusiness Member
Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes
9y
Hi, @Lee Eckert and @Tristan H..
If your tenants are interested in home ownership and your willing to help them by selling and carrying the note, I think that's a great opportunity for both parties. I'd just make doubly sure that the tenants are truly ready for the responsibilities of being an owner rather than a renter.
That said, I have bought many houses here from foreclosure and with seller financing. Having been through both processes dozens of times, the event of default is not scary at all. There are several really good real estate attorneys in town who can help. Plus, if you ever have questions about it, I (and several others) would be happy to talk you through it.
The biggest risk is that you take back the house and it's is worth less than the borrower owes (primarily due to deferred maintenance). Hopefully, periodic inspections can prevent this.
Best wishes and please keep BP posted!
Investor's Guide to Memphis Real Estate
View Page
2 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.