What's Owner Financing Story?

Question

Hey BP nation,

I'm working on a owner financed deal to purchase a retail/office building. I would love to hear your owner financing success stories and best advice. Please share your wisdom!

Jim Goebel · Answer

Our custodian is Strata Trust Co out of Austin TX

They have done a good job.

They used to be called Self-Directed IRA Services and re-branded about a year ago.

Caleb Stephens · Answer

With regard to my deal, we're still working out the details. The seller is very interested in OF to defer the capital gains tax. This is the building where my office is located, so I know the owner pretty well. He is 65 and looking to downsize his portfolio.

The building is about 45% vacant and a bit tired, but his asking price is as if it's full at a 7 Cap. I am going to offer a 7 Cap at current NOI, with 10% down. If he doesn't like that, my counter offer will be to split the difference between asking and offer price and 12 months before first payment is due. This will buy me time to do the TLC necessary and fill the vacant spaces.

Caleb Stephens · Answer

Yes, I did. Sorry, I'm new to this forums and working from my cell phone. I'm not sure how to deleat that. I also wanted to edit the title of this post, but it didn't look like I could. I could only edit the body of my post.

Jim Goebel · Answer

@Caleb Stephens

looks like you double posted

Caleb Stephens · Answer

Thanks for sharing @Jim Goebel! It's a beautiful home. Sounds like you bought it right. That's a nice way to work it for both you and the buyers.

You said it was "owned under IRA". Is that through a self directed IRA?

Jim Goebel · Answer

Care to share any more thoughts about your deal?  We are also looking for additional insight as this is our first time.

The initial thought for ours was to structure the deal as a lease initially, then after some time it would transition to a 'lease with purchase option' then if lessees execute the purchase option, that's when the owner financing would kick in.  However, per recent conversation with our trusted RE attorney, we were informed that what's called a 'residential installation contract' let's us get around the trouble in the hopefully not likely event that there was default on payment.  Basically - a way to avoid having to go through the lengthy foreclosure process.

Jim Goebel · Answer

Yep, self-directed IRA.  It's been great to be able to use the real estate experience for that vehicle, it's definitely out performing the stock market

Caleb Stephens · Answer

Thanks for sharing @Jim Goebel! It's a beautiful home. Sounds like you bought it right. That's a nice way to work it for both you and the buyers.

You said it was "owned under IRA". Is that through a self directed IRA?

Jim Goebel · Answer

We are offering owner financing on a house we rehabbed.

It's currently being leased for $1550 / mo in Des Moines IA.  Folks who moved in expressed interest in purchasing.

House is owned under IRA.  For multiple reasons we've decided to offer owner financing.  Terms have been tentatively presented.  Plan is to give folks there 6mo-a year of leasing and then at their option they can execute the 'next step' ie owner financing etc

Bought for $52k, put a lot into it.....  I'll leave it there.  Lots of love and it's a pretty house.

This is our first time with owner financing so we'll see how it goes.