Owner Finance Lenders

[Luke Calhoun]

Howdy, I have some renters who are wanting to purchase the house from me. They will not be able to go conventional financing as they just now enrolled on credit repair and the wife has only been at her job for 6 months. Are there any private lenders out there for deals like this? Hoping for 5%-10% down and a 10% interest rate.

[Alex G.]

@Luke Calhoun I am a long time Austin area investor, primarily in houses.  I also buy payments on owner financed mortgages. However, just a work of caution. There is a bunch of laws on the books, both federal (Dodd Frank, Truth in Lending and others) and state laws. They regulate the sale of the non-primary residence (investment / rental houses) to consumers. In this case you’re an investor selling your non-homestead property to a consumer— all of these laws apply to you.

I suggest you get help from somebody knowledgeable on the subject. Make sure you provide all proper disclosures to your tenant/buyer and comply with other requirements you need to comply with. Make sure you have good loan docs too as well as get the lender’s title policy.

Another good idea would be to set up a professional loan servicer who can collect payments from you tenant. Debt collection process (which you’ll be in as an owner of the mortgage) is also regulated and has plenty of responsibilities for the loan owner. A professional loan servicer should comply with those for you, as well as provide an online account access with loan info, payments, escrow, multiple ways for the buyer to make payments, etc., etc.

You’ll likely find that in the absence of most of the above, the value of your mortgage will take a massive hit when you’re ready to sell the loan (or some of the payments) and cash out.

I have an article somewhere on my website that talks about all the factors affecting a value of your loan, if/when you decide to sell it. DM me and I’ll send you the link.