Live and Flip in Raleigh, NC

8 Replies

Hello Bigger Pockets, 

I am a young guy who is fairly fresh into the corporate world that has a goal to retire by the age of 35!

I know that real estate is a great way to aid in me achieving this goal. However, I can't pull out a conventional loan just yet due to me only having 6 months work, they are looking for at least two. 

There is a property however in Garner, NC that is a 3bd/2ba with all appliances and a sizeable backyard in a very well kept part of town. It's being listed as a owner finance and they fellow selling it seems extremely genuine and good hearted. The price tag is 95,000 and he is asking for 8-10% down and 8-10% interest on what he finances over 20 years. This guy is very flexible as I've already mentioned that I would want a shorter loan period and lower interest rate and he's already swaying my way. 

I also know that I can get at the very least 1,000 a month for this property in rent. IT's very close to NC state and Raleigh, NC so vacancy will be very low. I might even be able to squeeze out more rental income if I get two college kids paying for individual rooms. 

The place is in fair condition and I could add a lot of value to it as I have a little bit of experience managing my families properties in Savannah. 

My question is what are the risk of buying with a owner finance? 

What steps can I take to mitigate this risk? 

The numbers to me make sense. I plan on living in the property for a year before I take out a conventional loan to invest in another property (multifamily) and repeat the process. 

Ps. I don't have the money for a downpayment right now. It will be around 8-9K. However I think I could get some family to pitch in and give them a 15% return on their mini loan. Or would there be a better way to go about the down payment issue? 

Thanks for any feedback. I have thick skin so fire away! 

- Justin 

My biggest fear is that he is doesn't put the money where it belongs.  And if he is foreclosed on I am up **** creek without a paddle. How can I mitigate this issue? 

I assume that the seller completely owns the house with no liens. The seller is acting as the bank and financing the deal.  Only the owner can foreclose on a property.  If you pay the owner, you will not be foreclosed on.  There is no bank involved.

It looks like a win-win.  The owner gets steady income and does not have to pay taxes on the entire amount in this tax year.  You have the opportunity to purchase a house at a low downpayment.

Maybe someone else knows of issues with owner financing.

typically from what I have seen sellers offering the property with owner finacing own it free and clear. If the bank still had a mortgage, he would be selling it sub-to. I would look into a service that escrowed taxes/insurance and then paid the seller the remainder of your agreed to payments. That way you both are assured the money is handled correctly. 

@Justin Hackney

Hey guys,

I really appreciate the feedback. I'll be meeting the guy on Monday and walking the property. I'll keep the forum updated on the development of the deal and I'd really appreciate to see what everyone thinks. 

Yall are awesome

Until Monday, 

Originally posted by @Justin Hackney :

My biggest fear is that he is doesn't put the money where it belongs.  And if he is foreclosed on I am up **** creek without a paddle. How can I mitigate this issue? 

 Welcome to BP.  Glad you are here.  Clarify for us which offering is on the table:

1.  He owns free and clear.  He will hold the note and deed will transfer to you.

2.  He has a mortgage and you are buying subject to that mortgage.  From your initial post, I don't think that is the case but wanted to clarify.

3.  He has a mortgage and is not paying off the mortgage. He is creating a new loan and "wrapping" it around the existing mortgage.

Others can chime in as well, but if #1 is what is on the table, then there are not a lot of risks. He is financing the deal rather than a bank. Since you want to refi in a year or so, make sure there is no pre-pay penalty.  The owner may be looking for 20+ years of retirement income from the note and therefore may want a pre pay penalty, so just make sure he doesn't include one.

If #2 is on the table, then the bank could invoke due on sale and call the note. Lots of discussion here on the forum about that.  Do your due diligence.

#3 is the only option I can think of whereby he could "not put the $ where it belongs" and you would stand to lose.  I can't offer an opinion on this strategy but would consider it the least ideal way for you to buy. Others can chime in if thats what he has put on the table. 

Good luck.

Thanks for the help guys, 

I passed on the deal after I inspected the place. Looks like it has some structural problems that I don't want to inherit right now. 

If anyone knows of an owner finance or Lease option in Raleigh area let me know. I'm open to any opportunities