Owner financing?

Question

Im just getting started with REI in the dc maryland va area and I have a general question about getting established.  How do I go by finding a homeowner whose willing to finance his own property to an investor in the purchase of a sfh?

Jeff Stephens · Answer

In my experience, there are a couple things to consider. The seller must have both the a) ability to provide seller financing and b) the willingness

Ability

While I know there are some creative seller financing strategies for sellers with no equity, in my experience generally seller financing works best when the seller has a lot--or even 100%--equity in the property. You can find these people by purchasing a high-equity or free and clear list through a provider like REIsource.com or get it from your title company.

Willingness

Now that you know they have the ability, you have to get a sense for their willingness to provide you the loan. In my experience, the most important part of this is truly understanding what their goals are. For instance I did a deal about 18 months ago where the seller had recently sold a 12-unit building and was reeling from the capital gains. He wanted to unload another house, but didn't want the capital gains hit right away, so selling it on contract to me was a huge win for both of us. But if I hadn't known his goals, it would have been difficult to have suggested a relevant solution like seller financing to him.

One last thought: they may say that they don't have the willingness to provide seller financing, but if you show them the alternatives (which might not be as good), and the benefits (which can be fairly attractive), they may change their mind. I experienced this just yesterday: a free-and-clear seller said she wanted to cash out because she had plans for the cash, but when I ran my numbers I realized my cash offer was going to be well below her asking price. So I ran my numbers as a seller-financed deal and saw it was potentially much more favorable for her (and me!). So I presented her three options: a cash option, a short-term carry option and a longer-term carry option, and when I presented them I said "I fully respect that you said you don't want to carry the note, but I thought you'd want to see these options just for comparison and food for thought." She appreciated me sharing those with her, and has opted for the longer-term carry option after all!

Andrew Syrios · Answer

It's all about finding motivated sellers. If the seller is motivated, they will usually be willing to loan back if they can. If they can't, then they're often willing to do a subject to.

Rocky V. · Answer

Seller financing should be one of the options you present to a seller.  I had a seller that was adamant on his price.  I told him the only way I can give him the price was if he owner financed.  He agreed at 0% interest.  You have to think outside of the box and sometimes you can create a winning situation with terms regardless of price.

Tom Valichka · Answer

Michael,

There are many ways to look for owner financing. You can search online, craigslist, what have you.  But as others have said the best way is to go search for "for sale by owners" or just straight up house for rent signs and asking if they would consider selling under owner financing, or even lease option wouldn't be terrible.  If they own the house outright and have paid off the house and just want to sell the house this would be a perfect owner finance.  You can propose to them that they will be getting more money over a longer period of time while also receiving monthly income.  This method of riding around and searching for signs and leads may not be the most convenient, but it could prove to be beneficial.

Justin Pierce · Answer

Our market here in the D.C. area is a bit different.  Finding seller financing is possible anywhere but I do think it will be a bit more challenging here.

-Most real estate professionals in our area are not open to any creative financing.  In this area they pretty much just want you to have a preapproval for a loan or cash in the bank before they'll talk to you.  That makes it tough to communicate with sellers.  You can skip the realtor and go direct to sellers but everyone knows a realtor so they'll ask for advice.  Most realtors around here couldn't even tell you what seller financing is.  I went and got my realtor license in Virginia because it's really hard to find a good investor's realtor around here.

-The market is pretty hot and high end.  Most people want out of their homes completely.  If they can sell it out right they will.

-If you do find someone who is open to seller finanincing it will most likely be tough to get the home at a good price.  And rents here are fairly low in comparison to purchase prices.  Bewary, just because you can get a home with nothing down doesn't mean you should.  If you can't cash flow it then it's probably not a good deal, seller financing or no.

You can find the deals but you will have to look far and wide.  You're probably looking at 1 in 1000 homes will be workable with seller financing.  That's no problem.  Just identify that subgroup of home owners that will be a better ratio.  Maybe absantee landloards that have a lot of equity.  It's like finding a good fishing hole, keeping your line in the water, and waiting for the right bite.

Shelly Swanzy · Answer

We found our properties on the mls and their sales price was too low for a mortgage. So we presented the realtor with our offer to rent to buy with $8000 down (sales price $28000 needed rehab)  Realtor called and said seller accepted our offer.  Just ask they'll either say yes or no.

Ben Leybovich · Answer

The best way to find owner financing - build relationships :)

Lance Lvovsky · Answer

I have been wondering as well what is the best way to get owner financing. I am guessing finding an owner that is willing to do this. Negotiate to agreed upon terms and go from there.

Tom Fields · Answer

@michael vincent Pitt I am in the Nova area also. Our market is pretty high end. I am also looking for owner financing options. Sometimes you will get listings on craigslist. Best of luck.

Tom

Owner financing?

Most Popular Reply