Questions about Selling with Owner Financing

[Adrian M]

Fellow Investors,

I would really appreciate your advice on this matter. A tenant of mine is very interested in buying (with owner financing) a property that I own. I've never sold a property with owner financing. Below, I've listed my concerns in hopes that some of you can provide some guidance (based on your knowledge and experiences).

My Concerns:

- The loan will continue to weigh against my Fannie Mae 10 property limit.

- I will have to keep detailed records for principal and interest paid.

- I will have to 1099 the Buyer each year.

- I will need to verify that taxes and insurance are paid each year.

I admit these are not huge concerns. And, I can already think of some ways to address each of these items. That being said, I would love to hear how some of you have handled each of these items. Also, if I am leaving out any items that could potentially be a challenge, please add them to my list (with your advice on how to address).

Thanks for your help!!! -Adrian

[Bill Gulley]

@Adrian M many of your concerns, like the 1099, collections, checking on insurance and taxes won't be a concern since you won't be doing the collections or loan servicing in another month. Dodd-Frank and the CFBP says you'll be using a loan servicer, which is a good and the best way to go.

If you have a mortgage you'll have the due on sale clause to deal with as Jon mentioned.

Your buyer will need to go to a mortgage originator, you won't be dictating terms so much, but you don't need to accept the required terms either.

Rent to own is still a financing arrangement and you have the same issues you'd have with seller financing, any type of financing arrangement is covered by the Act, no way around it.

There are tons of threads on the subject, be careful you're not reading about some system or program type info on how to, see your attorney and discuss it with a registered mortgage originator. It can be done, if you do it and your are not compliant, I'd say the risk of being exposed on some illegal deal will be pretty great. Good luck and happy reading..... :)