Owner financing
los angeles, CA · Member since 2009 · 223 posts · 4 votes
I have about 30k saved.. and I want to buy a second home owner financing. I tried to look many ways and can't seem to find a deal.. what's the easiest or best way to find owner fianancing deals... can't seem to find any and Los Angeles is such a big city to..
Do you mean a second home for yourself or as an investment.....?
Actually knocking on doors does work, knock on the door of properties with for sale signs posted, tell the seller you don't want to waste their time, yours or the agents and if they would consider financing, then go into your pitch.
Look for older landlords who would like to retire, they get rid of the headaches have an income a deferr taxes, good deal for a retiring landlord.
Go to foreclosures, some there may be flipping the purchase.
Look for rent-to own ads and make them your offer, don't fall for the rent-to-own scam stuff, make your pitch.
Look in the Recorder's Office for those who have carried notes, non bank lenders, like Jerry Jones, LLC, then check the records to see what properties they own, go look and contact them with your offer.
Go make friends with a nursing home administrator. New residents will often be selling their home and chances are good that the adminstrator will ultimately be getting the proceeds to pay for care. BTW, this is a strategy all to itself and can keep you busy if you understand the system.
Get with a note buyer who picks up non-performing loans, try to buy out the original borrower and assume the note.
Check the foreclosures and see if an individual or non-banking type is foreclosing, work out the note and buy from the owner, it's better than a foreclosure for both of them.
Just because Realtors don't "do" seller financed deals does not mean you can not make the offer and spell out the terms. Look for slow moving properties and those pulled off the MLS.
There ya go, get busy....good luck
I already tried that. I have several agent but none of them work with seller financing. I told them and its been almost a year and no one has called me for owner financing. The RE clubs.. says to go door to door not much help..
Do you mean a second home for yourself or as an investment.....?
Actually knocking on doors does work, knock on the door of properties with for sale signs posted, tell the seller you don't want to waste their time, yours or the agents and if they would consider financing, then go into your pitch.
Look for older landlords who would like to retire, they get rid of the headaches have an income a deferr taxes, good deal for a retiring landlord.
Go to foreclosures, some there may be flipping the purchase.
Look for rent-to own ads and make them your offer, don't fall for the rent-to-own scam stuff, make your pitch.
Look in the Recorder's Office for those who have carried notes, non bank lenders, like Jerry Jones, LLC, then check the records to see what properties they own, go look and contact them with your offer.
Go make friends with a nursing home administrator. New residents will often be selling their home and chances are good that the adminstrator will ultimately be getting the proceeds to pay for care. BTW, this is a strategy all to itself and can keep you busy if you understand the system.
Get with a note buyer who picks up non-performing loans, try to buy out the original borrower and assume the note.
Check the foreclosures and see if an individual or non-banking type is foreclosing, work out the note and buy from the owner, it's better than a foreclosure for both of them.
Just because Realtors don't "do" seller financed deals does not mean you can not make the offer and spell out the terms. Look for slow moving properties and those pulled off the MLS.
There ya go, get busy....good luck
These are all great.. Anyone with success stories of how they got owner financed deals?
Owner financing deals are not "found" they are negotiated. Agents aren't likely to call you because few properties are listed with owner financing. Most of the time it happens during the negotiation.
In today's market there will be more and more sellers who need to sell but can't sell becuase the buyers can't get financing. One option is for them to finance it themselves. Getting to that point will have a lot to do with your skills at explaining to them what owner financing means and how they will benefit from it.
I expect to be selling a few properties this year with owner financing. Getting in contact with other investors or investing clubs may lead you to sellers who would consider owner financing.
- Ned
I would add: check Craigslist and use the search words "owner financing" or "seller financing". I just checked it now for LA and there were a lot of listings that came up. I actually found a few deals that way in the past.
Another recommendation: make sure you get the property appraised if you pursue a deal. Don't overpay simply because seller financing is being offered, especially if there's a balloon payment on the deal. If you overpay now and have to refinance in 5 years, it could be very difficult.
Good luck!
- Tom
Yes i have tried criagslist.... it is filled with experienced investors who try to find the greater fool.. They want double the price of the mls for owner financing... its kind of crazy. They want 2006 price, in 2012 when houses are no where close to what it was before.
It's really great you found it in the past.. it gives me some hope.. Any other stories of how you found owner financing with success would really help.
The key to getting the seller to finance a project at a non-crazy price is to have a solid marketing plan that is targeted at distress. Back when I used to chase stuff like this we used yellow letters targeted at lists of people with severe changes in their credit scores. There are companies that sell lists like this. I know....it is scary this information is for sale.
If you put out thousands of yellow letters you will get many calls. I got sick of dealing with nut-jobs on the phone so I farmed this part of the business out to a call center that specializes in dealing with distressed sellers. I only called people AFTER they had passed the screening of the call center.
From there you can screen more on the phone. You can get the seller to describe issues with the property and qualify that the deal fits with what you want to buy. Only THEN would I go out to view the property. I would have a very real expectation of getting an inked contract by the time I spent my time and gas driving out to really inspect the property and make a presentation.
From that point you need to know your stuff pretty well. Sellers ask a number of standard questions. Many of these are detailed in my article here:
Subject-To Overview and Thoughts
Once you have an inked contract and all of the data you need you have to do due diligence with the lender and get things through title.
I'm not sure how well you know subject-to purchases, but this is a technique that is much easier to learn by observing others do it. Using someone else's credit to finance deals for a long period of time has risks too:
-What if the seller decides to sue you to get the loan out of their name?
-What if the lender decides to ignore the additional insured on the insurance policy and places forced insurance on the property?
-What if 60 Minutes runs a special about how evil investors are taking advantage of sellers and the lenders decide to start challenging you and want to call the note?
-What if interest rates rise and lenders want to call the note?
I could go on and on and on. That should not discourage you, but your eyes should be wide open when you decide how to finance your growth.
Another thing I want to emphasize is that you SHOULD NOT be using other people's financing if you are unable to refinance the property in the future. It is unethical to tell the seller you will make their payments if you can't do it because some external factor causes you to procure your own financing.
Note that there are a ton of other ways to get the phone ringing:
1. Thrifty Nickel or Greensheet ads
2. Bandit signs
3. Postcards
4. Realtor leads
and tons more...
this business is all about marketing... most don't do enough so they have to squeeze their funnel like they would a tooth paste tube. If you're looking for opportunity the key is look where the sellers who seller finance are...
If equity isn't an issue and you're just wanting a seller financed deal run a search of private money recent foreclosures. Avoid trustee deeds to corp and llc.
I've had lots of luck with owner financing and Subject 2's by mailing my target neighborhood or mailing non owner occupied houses. I mail these people every 3 weeks and we get several leads.
I also get leads by mailing people in foreclosure who are behind on payments. I was able to buy several homes with equity by just bringing the loan current and buying the house subject to the existing loan.
I've tried bandit signs. Spent $200 to make the signs + spent another $400 and got some of them to post them up. $600 investment down the drain. I got a lot of calls from people who have
A) no equity and are about to lose their home, they owe the bank $500k on a house worth $250k (i cant buy this)
B) lots of people with variable loans.. which means i have to qualify for a bank in 1 or 2 years (I do not want to qualify for a bank, i want to get a renter that will pay the mortgage)
C) people with equity.. very few and these people want 2006 prices..
so $600 sent on bandit signs , left a bad taste.. just a lot of people with problems I couldn't fix.
Monica you seem to have better luck, few questions... to make this discussion interesting.
1. how do you get a list of non owner occupied houses and ones that are about to go into foreclosure what is the best way to get this?
2. when you buy the houses and get the loan current do you kick the owners out of the house? You make a deal with them that they leave, you find renters and you will make the loan current for them?
3. do you really want ot make the loan current, if the house is $500k and now it is only worth $250k?
I really like ron legrand's stuff and it all sounds great.. but when i'm actually doing it.. it's extremely hard... the gold mines stories "finding a person who is divorce and just wants to get rid of the place because they hate it" I have not run across.. so instead of listening to ron legrand.. stories from real people like monica is a big help... let me know of any other successful methods everyone used in the pass that worked for getting owner financing homes.
$600 in marketing is basically nothing. Investors spend thousands of dollars marketing for deals to find a good one in many cases. Marketing also needs to be consistent for you to get quality leads. If you have a dearth of leads you'll be trying to cram the few good ones down the seller's throat and you won't have the posture necessary to do deals on your terms.
Bandit signs are also more expensive than yellow letters. I also think they are less effective. If you are going to have a single lead source then yellow letters to a targeted list of sellers that are likely to meet your buying criteria is the way to go.
Sarah Jones wrote
Perhaps that is the key issue right there. Are you expecting it to be easy? Bryan Hancock's message is right on target. It takes looking at a LOT of marketing and a lot of deals to find the real winners.
Your comments above about no equity, or wanting high prices is typical. Most of my leads are the same. But every now and then a gem comes through.
One thing that might help You are not looking for real estate - you are looking for motivated sellers.
Once a subject to is paid off, what deed does the mortgage company use as paid in full? I'm assuming the original one with the original owner. If they do use the original, how would you get that changed into your name to show that you are the owner? It seems like it can cause problems if you decide to sell after it's paid off.
Shanequa J. Normally the mortgage company will not use a "deed" it will be a release. The release show that the lender no longer has a lien against the property. That will apply regardless of who owns the property.
Thanks for posting this question Sara. There is a lot of great information here.
@shanequa
On a sub 2 the deed transfers to you. Most will use a grant deed or warranty deed. The lenders release is a reconveyance to the mortgage deed or trust deed.
If buying with seller financing then you could either have the seller take a junior trust deed or they could use an AITD.
I would rather the seller carry a junior over an AiTD
Sarah Jones Almost every seller will say they won't do seller financing. And as you've seen on craigslist, the ones that offer it are often selling something that can't be sold any other way and are trying to make a buck based on your need for the financing.
Equity: if you have limited marketing dollars, focus on marketing to only those with equity. You can buy targeted lists in your farm area of owners with equity. Equity, however, is not a source of distress or motivation for the seller. :) Think about what other things might motivate a seller to need/want to sell. Code compliance issues? Tax liens? Problem tenants? Vacant? Create a list that is targeted to owners with equity and with at least one other potential distress.
Marketing: While yellow letter marketing is one way to go, any targeted direct marketing is better than none. The basic message is: if you're selling I want to buy it, I can buy your house hassle free and quickly, etc. You get the idea. If you spent $600 on letters, that would be 1200 pieces. 1200 pieces sent to the right list will get you calls.
Seller Financing: that happens from listening to the needs of the seller. Some really need to be done with the property or done with their relatives or done with their tenants more than they need the money. Those people can listen to "some now, some later", even if they say are not interested at first. Sellers with real cash needs need cash. In some cases, when you can't really figure out the motivation, you can let the seller know you pay less for cash, more for financing. Lots of Boomers and seniors are paying more attention to interest rates and cash flow these days.
This is the scenario i get a lot. The person has no equity, owes $500k on a house that's worth $250k. I can probably get someone to rent out the house to cover mortgage but I may have to put in $200 a month of my own money if i do subject to. Is this house worth saving?
Also
how do you get a list of non owner occupied houses and ones that are about to go into foreclosure so i can send them mails?
I wouldnt do the deal. And if you give me your city and state I can tell you if there are any canidates in your area
Don't work with any properties without equity, for now. Messing around with cash flow plays and future appreciation games is not what your $30K savings is for.
Listsource.com is one company that sells targeted lists. You can create your own list and they also sell pre-made lists. Title companies have data and mailing lists they give to clients. Do some research on this site for marketing and list ideas.
I'm thinking bandit signs is what is getting you the bad calls. Bandit signs work but it's a numbers game as many people in this market don't have equity and will call to check out what you have to offer. You have to sort through a lot of leads to find ones that work. Bandit signs don't have staying power unless you do them on a regular basis. I suggest stepping back from the bandit signs and spending a little time on learning some direct marketing strategies.
@Michael Quarles
Im in Los Angeles, California.
I want to put together a list of people who are "behind on their payments with equity".. Any other web sites I can look for this kind of leads besides listsource..?
Around here finding NOO properties is as easy as looking in the county records. The deed records show the property address and the owner's address. If they don't match, you have a NOO property.
Foreclosure filings are also public records.
There are services that provide this data in a consolidated form. But its not free. And they're mostly local. The one I would use if I wanted this data only covers counties right around here. I'm confident there similar services in your area.
Marketing is not cheap nor is it easy. You'll have to pay for the list, you'll have to pay for the letters. And you have to keep sending letters. One letter to someone is unlikely to produce any results. Six letters over the course of six months will produce better results.
The first house I ever bought was an owner financed deal right off the MLS. You need to find regular sellers (not banks, not short sales) and then have your agent ask their agent if they would consider owner financing. If you want to improve your odds, research the property first and look for ones that have been owned for a long time and don't have recent loans. But just having your agent ask their agent is quick and easy. You'll mostly get no for an answer, but you only need a few yeses to succeed.