Seller Financing a Spec Home

[Jimmy Nguyen]

I am thinking of ways to create passive income from new construction.  One option is to build new rentals.  However, I was bouncing around the idea of doing seller financing as the spec home builder/owner.  If my future business has good cash reserves, it could be possible to build a new home with no or little outside financing needed.  Then if we did seller financing, we could use the buyer down payment to payback loans (if any) and then sit back and collect the mortgage payments.  Has anyone done something like this?  What are the pros and cons compared with building new rentals?  I know one advantage is that you wouldn't have to deal with maintenance. 

Thanks in advance for any advice that comes.

[Bill Gulley]

Jimmy, as a builder you need to check Dodd-Frank, builders have special provisions with seller financing, newly constructed homes and seller financing to your buyer got hammered. 

Now, building rentals, absolutely, just don't be selling them within a year, lease them. The volume you'll need will put you into the operator status, no homeowner occupied exemption for you. 

I assisted with the seller financing for a very large contractor in the Midwest, years ago and that is pretty much the game plan, accept you can assign notes for collateral for other financing, but that's gone now. 

Go build small office buildings or strips, that's commercial and you can do just that! Good luck :)