How To Find & Structure Owner Financing Deals

Question

I’m new to real estate investing and I’m looking to buy my first rental property using owner financing so I have to come out of pocket with little to no money.

What are some good ways to find these types of deals?

What type of seller(s) are ideal for this type of creative real estate investing strategy?

Also, my grandmother owns a condo in Cleveland, Ohio that she doesn’t use and I would like to pitch owner financing to her.

Here are some terms I had in mind. Please feel free to leave feedback and share your experience using this creative strategy.

Purchase Price: $45,000

Term: 120 Months

Balloon Payment: at The end of 120 months

Interest: 4.8%

Down Payment: Will pay for repairs in the form of a down payment. Repairs are estimated to be anywhere from $19K to $28K

I plan to use a private lender/rehab loan to fund the repairs.

Any advice will be helpful. Thank you in advance!

Cody Richard · Answer

@Paris Johns I agree with @Michael Ohara. You won't know if a seller is open to owner financing until you ask. Also, it is possible to get much better terms than the 10/10/10 rule. I'm typically between 3-4% interest, 3-6 year term, and 3-8% down. The most important thing will be to practice and understand terms so that when the opportunity presents itself, you are ready to execute. I recommend listening to The Creative Financing Podcast. That is where I learned everything I know about terms.

There are so many different ways to structure owner financing. You just have to find what works best for you and your business.

Michael Ohara · Answer

Finding owner financing deals are just a matter of asking the owner if they are willing to OF. Most willing owners don't need the cash right away, they own the property free and clear, and they like the idea of "loaning" their equity for a percentage.  Structuring an OF deal allows you to be creative, there's no hard and fast rules.  Great you can get experience from buying your grandma's condo.  You will most likely need to get a friend to loan you the rehab since the amount is so small and lenders want first position (as said above).  OF is awesome.  All the best. 🤙🏽

Joe S. · Answer

You usually have to talk to many sellers to find one that will work with you.Can it be done,,. Yes

Is it easy? “ No.”

Chris Seveney · Answer

@Paris Johns

Few things

1. Private lender typically will not finance renovation if you have a loan already - they don’t like 2nd position especially if grandma was the original lender.

2. Typically most Owner financed deals are 10/10/10 method at minimum. Meaning 10% Down, 10% interest and 10 year term

Some require greater Down payments. In today’s world post covid rates and terms have gone up significantly to mitigate additional risk.

Also expect to pay full asking price or little more for property with owner financing

Can you get decent deals still - yes but it’s not like they are in abundance.

John Koster · Answer

I would echo would Chris has stated, but better terms are possible.  I know a few investors who have negotiated much better terms.  Better rate, low down payments and longer terms are all within the realm of possibility.

Paris Johns · Answer

@Chris Seveney

Thank you!

How To Find & Structure Owner Financing Deals

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