owner financing

[Richard Kolb]

Hello everyone,

I have a little bit of a dilemma and was wondering if anyone here could give me a little guidance. I am going to give you a little scenario and in order to simplify things I’m going to use very round number. I am in talks with this very sweet little old lady from Sweden who owns a duplex whom I contacted through direct mail. She definitely doesn’t want to deal with the tenants or property anymore. The property is owned free and clear. So, I made an offer to her for $1000 at signing of a lease option and then $2000 per month for 50 months under a lease option and I would sublease to the current tenants. Then the balance of $150,000 would be due at the end of the 4th year. I figured I could easily get a mortgage for $150,000 on a duplex with comparable sales today at $250,000. Here is the issue. I don’t think she understands my offer. She keeps saying “what happens if you decide not to buy at the end of 4 years then I have to start over.” I explained to her that I would never walk away from 100,000 in equity. But she keeps says that all I am out is the $1000.

So here is my question. To put her mind at ease I am thinking of making a new offer but reversing it. Instead of building up $100,000 in equity then paying off the balance of $150,000. (which is better for her because the property stays in her name till I pay it off.) What if I offer to take out a mortgage for the $150,000 1st. Then make payments of $2000 per month over 4 years. This way in her mind instead of me only paying her $1000 up front I am paying her $150,000.

The only problem I see with this scenario is that (as I understand) for me to get a mortgage on a house for almost any amount I would need to take title at that time. So how do I put her mind at ease that I am going to continue to make payments over the 4 years of $2000 per month. 

Any help would be greatly appreciated.