​Pros & Cons of Owner/Seller financing?

[Quandra Adams]

Pros & Cons of Owner/Seller financing? I have already been pre-approved, have about 12K saved and have found a good number of properties but I do not want to kickout 7K+ for a multifamily (this is usually how my numbers look due to an FHA loan with money down plus the 4.5 interest). Would I get a better deal for these same properties with owner financing? A little rehab is not an option when going this route, is it? I ask, because I will most likely be living in one of the units as well and would want the place livable for me.

[Chinmay J.]

Originally posted by @Quandra Adams:

Pros & Cons of Owner/Seller financing? I have already been pre-approved, have about 12K saved and have found a good number of properties but I do not want to kickout 7K+ for a multifamily (this is usually how my numbers look due to an FHA loan with money down plus the 4.5 interest). Would I get a better deal for these same properties with owner financing? A little rehab is not an option when going this route, is it? I ask, because I will most likely be living in one of the units as well and would want the place livable for me.

 I don't fully understand your question, so my answer is going to be a little bit vague.  

Owner Financing is good in certain situations which I am going to list below:

• People who can't get bank loans because their credit sucks, or they might be newly self employed and bank won't loan them.
• People who have maxed out on govt backed loans. 
• Properties which banks won't touch because they are beat up. 
• Its also good sometimes from sellers POV if they want to defer their taxable income. 

Also for owner financing to work, the property needs to be paid in full. If there is a mortgage on the property, you can't owner finance it. 

With FHA you can get really good rates, and they allow light cosmetic rehab. There is of course a PMI associated with each payment.

I am not sure what you mean by "kickout 7K".. Not sure whom/what we are kicking, and why we are kicking the said person/thing...lol. But if you are thinking that @ 3.5% down payment, you are shelling out $7K out of your pocket for down payment (so basically property around $200K)...well... most owners would want more than 3.5% down.. to be honest..  If I am holding a note, and if someone comes to me with a proposal for owner financing, I would require at least 10% down payment. That's still much less than investor loans which cost you about 20-25% down payment.