What's better? Owner Financing VS Being a Landlord

[Daniel Pessin]

Hi everyone, I’m trying to understand the Pros and Cons on determining which is better, Owner Financing or being a Landlord.

From the research I’ve done, this is what I’ve found so far. I’m not 100% sure if this is accurate so any input would be appreciated.

Pros of owner financing:

1. The occupant will take better care of the property since they own it

2. Occupant pays for the property taxes and insurance

3. Occupant pays a higher interest rate at 7%

4. Because of the way seller financed mortgages are structured, you don’t incur capital gains tax until you start collecting on the principal of the loan, which, in a 30-year loan, allows you to defer capital gains tax for many years. This assumes, of course, that you fall into certain categories under the Dodd-Frank legislation.

Cons of owner financing:

1. You cannot refinance because you are not the owner. So if there is equity in the property, you do not get it.

2. Foreclosure is more difficult than eviction.

The Con I am most concerned with is not being able to refinance since you are not the owner assuming you transferred title during the owner financing. Is there a way to retain ownership and still get the other benefits?

Looking forward to hearing everyone’s thoughts and feedback.