Keep renting or Owner finance

[Jay Dean]

I own a condo free and clear.

After repairs, I have about $60,000.00 invested.  I can rent the condo for $875.00 and it nets about $200.00 per month.

I am weighing to options:

Option A - Continue to rent.  Net $200.00 per month / $2,400.00 per year.  Look into a cash out refinance (approximately 70%) and use that toward a second unit.  Estimated total leverage 30 - 40 %.

Option B - Sell offering Owner finance.  Sales price $65,000.00.  30 year term at 10% interest.  The goal here would be to find a person or couple with solid earnings and not so good credit.  This would be key to get these kinds of terms.

On their side of the deal - $570 Mortgage, $75.00 Taxes, $225.00 HOA fees - Total - $870.00 excluding expenses (same as renting).

On my side of the deal - Receive $570.00 per month (nearly three time what I am currently getting).

I recognize that I lose my cash position by using this option, but I see this as guaranteed money coming in monthly.  If they don't pay, I foreclose and repeat the process.

Not sure I fully understand the tax implications of the owner finance option.

Please share your thoughts and ideas.

Thank you.

[Ryan Detig]

@Jay Dean Wow, thanks for posting. There is a lot of information here. My simple answer is "it depends" haha. You have given lots of facts about the property but not too much info on you personal goals and financial standing. This info would be helpful to know to give a more educated answer. I say the following not knowing your area but in my area I would not be happy with 65k invested making $875 per month. I might consider researching your area and talking with your REIA contacts to see how much rent 65K in cash (un-leveraged) would get them. If $875 is great for 65K invested for your market then I would probably rent it out for a couple years and maybe you will end up getting a renter who is interested in a rent to own situation. If you find out that 65k could get you 1000 to 1200 in rent a month (my situation here) with a different property, I might consider trying to sell it at market value outright and search for a more profitable rental. I know I did not directly answer your question but knowing your goals and financial situation is important when determining a 30yr commitment such as owner finance.