Rental Property Investor · Akron, OH · Member since 2015 · 43 posts · 10 votes
I have a house worth somewhere around 140-160 in a great neighborhood. I definitely want it sold. I need the cash to continue investing.
So far I have no active people interested in purchasing it through a lender. I do however have a couple people interested in buying it through seller financing. They want something like 10% down and 5-6% interest over 30 years. I was reading a little on note investing and am not sure how feasible it is. Should I sell it owner financing and then try to sell the note to liquidate my equity? Do note investors want to buy notes like these or just non performing notes at a discount?
Specialist · Dallas, TX · Member since 2014 · 900 posts · 392 votes
10y
Hi Timothy, good dilemma to be in! You can do a seller finance to a buyer, though with all the Dodd/Frank changes, you would need to use a RMLO in your state to do financial checks to qualify them and handle all that paperwork. You might also try to get a larger down and maybe add a few interest points. Since they can't qualify, you can go up to 7-9%. Also, not many takers for a "green" note, though you might find one. Its better to let it "season" for 6-12 months before you try to sell it, as you will get more than a fresh one. Realize you will not be able to sell it for face value, except maybe in CA, as its a promise to pay, and at any time, they could stop paying. A 30-40% discount to the UPB would be in the ballpark. Kind of like when you win $1MM in the lottery, its usually $1MM over 20 years, or $650k or so in a lump sum. Good luck!
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
10y
You can seller finance your property and not have to use an RMLO. Many states offer a small number of exemptions.
The offers you are getting are not all that great for a third party investor. Typically you would keep the down payment and the investor would be left to the interest payments. In today's market 6% is not going to get too many people excited. The down payment is not all that bad at 10%.
As was mentioned often times there is a reason why the buyer seeking SF is not at a bank getting a conventional loan. It helps to understand what or why that is.
The same way that you judge the rate to hold rents is sort of the same way you can look to judge your SF situation. Baring in mind the larger the down payment the more the risk of loss is offset.
All seller finance should stay away from ideas of charging points at origination.
Good loans do not get discounted. Nor are all loans born with a future discount.
The best way to write a good loan is to write one you would hold because you may just have to.
Rental Property Investor · Akron, OH · Member since 2015 · 43 posts · 10 votes
10y
Thanks for your input very informative. Seems like it will be hard to find an investor to buy it. I had a few questions on your comments. What does RMLO and UPB mean?