Owner finance tax and insurance

General Landlording & Rental Properties
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Owner finance tax and insurance

Shawn Harvey
Rental Property Investor · Houston, TX · Member since 2018 · 38 posts · 8 votes

Looking to owner finance house to current renter after 18 months of renting. Always pay on time. Property has a loan with 65%LTV. First time Owner Financing. How does taxes and insurance work? Anything else I should think about?

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
8y

@Shawn Harvey Specify that they are responsible for both. Require them to list you as a "loss payee" on the insurance policy.

That will make sure you get paid if there is a claim and you get notified if they are late on paying their insurance bill.

The other option is that you escrow it and add it to the monthly payment and then you pay both these from the proceeds.

Make sure you specify that these may go up and they owe the difference when they do go up.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    8y

    @Shawn Harvey Specify that they are responsible for both. Require them to list you as a "loss payee" on the insurance policy.

    That will make sure you get paid if there is a claim and you get notified if they are late on paying their insurance bill.

    The other option is that you escrow it and add it to the monthly payment and then you pay both these from the proceeds.

    Make sure you specify that these may go up and they owe the difference when they do go up.

    1Reply
  • Sammy G.
    Rental Property Investor · Houston, TX · Member since 2015 · 117 posts · 55 votes
    8y
    @Shawn Harvey if you plan to sell the note, make sure to use RMLO company to qualify your renter. During closing account for prepaids - taxes, insurance, hoa. I use a servicing company for monthly payments and deduct TI. The PI will be deposited to your bank
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  • Chris Szepessy
    Catskill, NY · Member since 2018 · 636 posts · 668 votes
    8y

    I'm owner financing two houses from the same person. I'm responsible for paying the taxes. He kept the insurance in his name since it was significantly cheaper than what I got quoted and I just pay him when it's due. It's up to you on how you choose to do it. I also just send him a check at the beginning of each month. It's been 3 1/2 years with no issues.

    I guess I should add that the houses were owned free and clear when I purchased them.

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  • Mark Sewell
    Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
    8y
    Originally posted by @Sammy G.:
    @Shawn Harvey if you plan to sell the note, make sure to use RMLO company to qualify your renter. During closing account for prepaids - taxes, insurance, hoa. I use a servicing company for monthly payments and deduct TI. The PI will be deposited to your bank

    I'd like to learn more about this -- I know a couple RMLO companies here in TX but I'd like to know who you are using.  Would be willing to fund a modest 'lunch & learn' if you have a day open.  I'll connect with you.

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  • Shawn Harvey
    OP
    Rental Property Investor · Houston, TX · Member since 2018 · 38 posts · 8 votes
    8y

    I think lunch and learn would be good. I could help arrange. 

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  • Candace Noel
    Real Estate Broker · Woodbridge, VA · Member since 2011 · 33 posts · 16 votes
    8y
    @Sammy G. Hi Sammy, what does RMLO stand for? My apologies, I'm green on that term.
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  • Sammy G.
    Rental Property Investor · Houston, TX · Member since 2015 · 117 posts · 55 votes
    8y
    @Candace Noel residential mortgage loan originator. If you are selling properties within an entity or you are doing multiple properties in 1 year - RMLO is mandatory.
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  • Candace Noel
    Real Estate Broker · Woodbridge, VA · Member since 2011 · 33 posts · 16 votes
    8y
    @Sammy G. Thanks! :-)
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  • Sammy G.
    Rental Property Investor · Houston, TX · Member since 2015 · 117 posts · 55 votes
    8y
    @Mark Sewell yes a lunch meeting is fine. I can also arrange a free webinar if there is more participants interested in learning about the correct way to do owner financing.
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  • Danny Webber
    Real Estate Broker · Austin, TX · Member since 2016 · 834 posts · 449 votes
    8y

    My 2 cents

    1. require escrows

    2. You will collect your tax statement from the lender and basically duplicate it to the new owners, both of you cannot take deductions for this

    3. Insurance- a few diff paths on this

    A. Add as an additional insured on your policy 

    B. make them get their own policy with you as add'l insured and your lender listed as primary lien holder, your note in 2nd place

    C. keep your policy and make them get their own

    The lender is where insurance gets tricky on wraps. Any of the above could tip them off to start asking questions about the ownership of the property.

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  • Mark Sewell
    Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
    8y

    @Sammy G and @Shawn Harvey -- let's make this lunch & learn happen!

    I am looking at something like this myself.

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  • Mark Sewell
    Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
    8y

    @Shawn Harvey

    A guy named Mitch Stephens will be in town again on Tuesday, speaking at the Quest IRA trillion dollar mixer. He does a lot in this owner finance space. I'll be there for that meetup. I saw him speak last week at another event here in town and I really enjoy it and learned a lot.

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  • Shawn Harvey
    OP
    Rental Property Investor · Houston, TX · Member since 2018 · 38 posts · 8 votes
    8y

    I plan on going to Trillion Dollar Mixer. Will you be there next week?

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  • Khalil Gio
    Rental Property Investor · Panama City, FL · Member since 2016 · 13 posts · 4 votes
    8y

    @Sammy G. Id love to learn more about owner financing. I'm an investor in Panama city Fl and own 4SFR. Can I sell them and be my own bank if I still have a mortgage on them? ....also you mentioned a possible webinar. Put me on the list if you plan to set that up!

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