Question - San Antonio Note?

[Ryan Roberts]

Hello BP,

I have a home under contract in San Antonio and have a question about selling it with owner financing. It's in a great neighborhood (Thousand Oaks) and its an older home but can be rented as is. The plan is to sell it with owner financing, and then selling that note as a partial to recoup our initial investment. 

How many cents on the dollar will a partial sell for if the LTV is 90%, with a 6% interest rate? 8% interest rate?

[Rick Pozos]

The great thing about owner financing is that you are providing a service for people who may not otherwise be able to get financing. The cost for that service is a several hundred basis points. So instead of 4.5% at a bank or credit union, the buyers will pay 8% and maybe even 9.9% with you.

Now when you sell that loan, the buyer of the note will want to yield 12%+.

Plus they will want to see a qualifying package including credit report, job history, etc. The less that you have, the higher yield they will want.

Interest only for any amount of time is unheard of. I would not do it unless it was a remodel and then I might do it for 3 to 6 months while rehab is going on.

If you sell a partial of a year or two of payments the buyer of the partial is going to want 15%+ especially if it is a new loan that is at 90%LTV.