CONVENTIONAL OR PRIVATE FUNDING FOR FIRST DEAL?

Question

Hi everyone,

I have a client who cannot qualify for a mortgage due to a huge amount of student loan debt and he is lookg toward me to provide an owner financing deal. Hes so motivatd to move to a new home, that he started to send me what hes looking for  within his budget and we just found a home for him to live in. The home is on the MLS and I would have to go through an agent to get the property. I am in NJ but the home is in Massachusetts. Im not letting the distance be an issue because im also in CT and RI as well.

If anything, this would be my first deal and I want to cover everything I can to make to flow as smooth as possible. How should I buy the house as an investment so I can owener finance it out to my client? Should I use a convential loan to buy the property or use private money? I was thinking of putting a 30-year mortgage on the home, owner finance it for, at most, 30 years or maybe even less, until my client cleans up his credit enough to refinance the home later one. What should I except the process to be being out of state? Thanks in advance.

Anthony Angotti · Answer

@Asher Carr what kind of rate you have on private money and how open they are to then owner financing this to your client would be the first question.

It would need to be an exceptional deal for me to even consider this though. If he can't qualify for a loan based on DTI then you might be risking not getting paid yourself. If you owned the building outright your risk would be lower, but now you're getting into a loan to then give someone a loan. Once you analyze your actual return on this my guess is that your return would be very slim unless this deal is tremendous. You'd probably have higher return buying something on your own or private lending from a credit line to a more experienced investor with better financials.

I understand trying to do right by and help your client, but this seems like a lot of hoops to jump through. Unless this person is a personal friend or family and I didn't need the money I gave them I don't think I'd take this risk. I would just start looking for properties that this person can buy with owner finance without you being an intermediate lender. Or try to help them find a loan program that will work with their financial needs. Also, it may be best for them to come at buying a house from a stronger financial position.

Just my two cents, but how can you do it and should you do it seem to be two different questions here.

Asher Carr · Answer

Thank you then the input. Yes. This Is beyond the scope of what my business offers. I'm still looking for FSBO homes for him that can work. He has a large enough down payment ($50K) and monthly payment  of $2K to work with. It's just finding the right one for him. I wouldn't want to go through too much hassle trying to acquire a home and just GeT it under contract through terms with the seller.