Advice please: creative sale to existing tenant in Texas

4 Replies

I have a SFR with a lot of equity and the current tenants are interested in buying the home. I'm interested in some type of seller financing because I believe I can match my current cashflow as a landlord with interest on the loan and remove all my landlord responsibilities. I will want to place a lien on the property so that if they default I can foreclose if necessary.

Here are my facts.

Home value: $225,000
My existing mortgage: $110,000
Remaining years on mortgage: 21
Current rent: $1,925
My current PITA: $1,200

I believe I can structure a loan with appropriate rates to more than replace my existing approx $1,000 of cash and principal pay down each month with interest received on the loan.

Any suggestions on how to structure the transaction/loan? I'm not trying to be predatory at all. If they paid off the loan to me over time I would be very happy for this family. But if they were unable to make the payments, just like I would evict them if I were the landlord, I would want to foreclose on the loan. I'm truly trying to match my existing cashflow/principal pay down with interest while reducing my repair/maintenance costs all the while giving this family a shot at home ownership.

Any and all thoughts would be helpful. Thank you.

@Steven Anderson   My advice is that you absolutely need to have a qualified real estate attorney involved. Seller financing in Texas is a lot trickier because of the Texas SAFE Act.

It's my understanding that if you're seller financing a property that's not your homestead to a non-family member, you are required to have a residential mortgage loan origination license from the Texas Department of Savings and Mortgage Lending. 

@Fred Heller thank you for the feedback. I will look into that. Sounds like a non-starter but something good to learn about anyway for future potential transactions. 

By the way, I always see you active on the forums especially in Houston related matters. As someone who has used BP to further their learning and kickstarted their investing (bought two this year) recently your continued contributions are what makes this site so helpful. Due to the value I've received from BP  I try to be as helpful as I can as well. Thanks again for the guidance on this issue and the example you are on BP. 

@Steven Anderson My undestanding is that as long as you don't exceed three transactions in a year, you don't need a mortgage loan originator. You probably need to do a wrap loan with a land contract.

Here is a link to get educated about owner finance and other RE matters in Texas:

http://www.lonestarlandlaw.com/owner_finance.html

You take on certain risks as the seller in an owner financed transaction. Ensure to protect yourself with the help of an attorney and an adequate down payment.

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