Owner Financing House Hack???

[Edward Stephens]

I am a licensed Realtor in Kansas and Missouri, and successfully house hacked my first property starting late last year in Olathe, KS.  I'd like to leave my first duplex, lease the entire building, and move into another building to "house hack" again.  Because of the income requirements I cannot obtain traditional financing (Realtor who left their full time engineering job 8 months ago isn't a good lending profile).  For that reason, I'm looking for another multifamily property I can acquire with owner financing, a.k.a. "owner will carry" (OWC) financing.  My questions are as follows:

1) Does anyone have any tips for structuring an OWC deal where I will be living on the premises?

2) Does anyone have experience using the buyer's agency commission, the commission I would normally receive if representing a client, in lieu of a down payment?

3) Could someone please confirm that the normal tax benefits associated with rental properties (e.g., depreciation) apply to OWC deals?

Thank you all.  It's good to be back!

[Christopher Brainard]

1) I doubt many owners will care if you live on the premises or not. They're far more likely to care about your financial stability and how much they like/trust you. If you build up rapport, you should be able to get favorable terms. As far as the deal structure goes, It depends on how distressed the seller is and how much cash they need in hand today. The best way to approach this is to find out what the seller really needs and find a way to deliver.

2) Most OWC deals are looking for more than 2-3% down. If they are on the MLS and there is a co-op, I don't see any reason why the owner would care how you use your commission. If they don't have a listing and haven't set aside cash for a listing or buyer's agent, you may have a tough time convincing them that they need to pay you to buy their place.

3) You should ask your CPA - if you don't have one, find one.

On a side note, I do recommend that you find a loan servicer in your area - they will manage collecting your payments and ensure they get to the seller (so there is never a question of payments arriving on time).

-Christopher