creative financing

4 Replies

Hey BP,

So I have a lead on a house, all fixed up that has been on the market for awhile and the seller wants to go another route.  The area is great and she is willing to come down a little on her price.  It's free and clear and its listed for 209k.  I think I can get her down to 190k.  I know there are creative financing deals out there and this house is one I want in my portfolio since its in my target area.  Any advice ???

@Shawn Connors

That is great that the seller is willing to negotiate and that she has no mortgage on the house. You do have plenty of options. In terms of creative financing, it depends how would you want to purchase the property. Are you planning to use your own money for a large down payment and finance through a mortgage company/bank or did you want to ask the seller to do owner financing with a higher interest rate but lower down payment? Also, is this property you are considering to live in or to list to others to rent out?  

Regards,

Vinh

@Vinh Le I would love to do a lease option and find a tenant buyer to put in there

Originally posted by @Shawn Connors :

Hey BP,

So I have a lead on a house, all fixed up that has been on the market for awhile and the seller wants to go another route.  The area is great and she is willing to come down a little on her price.  It's free and clear and its listed for 209k.  I think I can get her down to 190k.  I know there are creative financing deals out there and this house is one I want in my portfolio since its in my target area.  Any advice ???

 Hi Shawn,

Free and clear house strategy: Offer Full Price, your payment, using an installment sale.

What is market rent? 

What cash flow do you want?

Say 209K sales price, rent in market = $1,000

offer 210K $500 per month on installment sale (or about that)

Look up imputed interest on IRS tables, charge that

http://apps.irs.gov/app/picklist/list/federalRates...

You want to sell benefits to owner 

  • maximizing her equity, 
  • creating a retirement asset she knows, 
  • Some money in Main Street, some in Wall Street
  • offer her a quit claim if you do not pay her, held in escrow, with escrow instructions if you default

The key here for you is to 

  • get a property that is a good quality buy and hold rental, 
  • good cash flow, 
  • without a bank
  • etc.

Sales Tip:

Compare to 

Real Estate is about 

Buy Cheap for under appraisal for cash

Buy Your Terms if you pay full price

@Shawn Connors

That is a great strategy too. With lease options you have about 2 choices. A lease option sandwich or an MLO (master lease option). Just remember to clearly state what you are planning to do with the seller upfront when you sign the lease option with her. Also, my recommendation would be to sign the option to buy the property as long as possible (5 years is better than 3, etc) and make your lease option to the tenant shorter (2 yr term). That way if the tenant withdraws from buying, you can always look for another tenant buyer for 2 more years or so. Just some things to keep in mind. 

Best regards,

Vinh

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