Any case where owner financing makes sense?

Question

Purchased property for 390K, put 15K into rehab. Home now worth 550+. Would like to sell and capture gained equity, also cash flow is not great and the house needs more work. Long-term renters want to buy at 550 as is, but can't qualify for conventional financing. We have a balance of 266K on the mortgage @ 3 percent interest. Mortgage payment is $1671/mo.

Chris Seveney · Answer

@Shelley Austin

While it sounds great - if they cannot qualify for conventional financing will they be successful and pay you?

If they do not qualify because of poor credit or income issues compared to being self employed etc there are differences - but typically people don’t qualify due to poor credit and people will seller finance to these borrowers thinking they woke up at a holiday inn and got a finance degree when in reality they repeat their past mistakes

Remember the definition of insanity is doing the same thing over and over again expecting a different result

Chris Seveney · Answer

Lets start with when it does not make sense: Owner finance does not make sense when the borrower cannot afford the property.  You did not say why they do not qualify? That is important.

Personally it only makes sense if you get 25% down, its on vacant land or on a home that cannot sell in the open market. Selling it for more money than its worth to a borrower who cannot afford it will lead to you needing to foreclose in 3 years and deal with all those headaches and a trashed home.

Adam Bartomeo · Answer

You wouldn't be doing an owner financing deal if you want to keep the current mortgage in place. You would do a rent to own or a sub-to. This would allow you to keep the current mortgage and keep entire control of the property. I would be less worried about their qualifications in these scenarios and more worried about the down payment. Creative financing is imperative in todays market.

Jeremy Jareckyj · Answer

Absolutely sounds like a good option! I would potnetially even suggest they pay a big more than value if they are getting that good of a payment/rate. I live in the SLC area feel free to shoot me a PM to chat more.

Jake Petersen · Answer

Owner financing is an option for sure especially with such an attractive rate. You have options, feel free to reach out if you want to discuss!

James McGovern · Answer

Owner financing makes sense when you have their credit report in hand.

Any case where owner financing makes sense?

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