Selling RE with owner carry but retaining an equity position?

Selling RE with owner carry but retaining an equity position?

Midlothian, VA · Member since 2013 · 130 posts · 17 votes
Hello, Curious if anyone has sold a home with owner-financing and designed the deal to keep a portion of the ownership of the house along with the new home owners? I'm talking about staying on the title with them, and keeping a partial equity position in order to keep the home more affordable to them via a lower purchase price or smaller down payment. I can definetly see this being of value of high price areas like Seattle or SF. I guess this would be a "residential partnership" I'm talking about consumer end-users, not investors. Overtly high-priced RE isn't a problem where I am, but I thought this might be a good way to share in the appreciation of the house while still selling (vs. renting) as a business model. No landlord headaches (main argument against buy-and-hold) and no giving up of future appreciation potential and a portion of tax benefits (main argument against selling on terms). I vacillate back and forth between buy & hold rentals vs flipping w/owner-finance; why not just do both...? I also figure that if I am on the title with the buyers, I might have a stronger hand in court if they decide to quit paying. Maybe? Yes? No? Any Dodd-Frank or other nanny-state nonsense legal land-mines to look out for here? Thanks!
0Reply
10 views

8 Replies

Jump to latestLatest
  • Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
    7y
  • Midlothian, VA · Member since 2013 · 130 posts · 17 votes
    7y

    Thanks for the link, Bob!

    LOL.  I actually just re-listened to your podcast on BP this morning on my way to work!  I was raised in Everett and used to take the Edmonds-Kingston ferry often.  My sister lives in Chimacum.

    Is your friend still putting mobile homes on land and renting them out?

  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    7y

    @Bob Malecki

    I have spoken to my attorney about these in the past as I was looking for a way to try and keep some equity. Unfortunately in many states they are no longer legal if it is owner occupied. Definitely do your due diligence on this.

    7e investments53 Reviews
  • Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    @Patrick Sears I don't have any experience with these kind of arrangements but they just seem to be a bad idea to me. When things go as planned, everything can work out great and everybody will be happy. When things go wrong, in the case of an owner-occupant losing employment or having some other financially distressful event, how will this be handled? If you have to foreclose, do you think it's possible that your "business partner" will have a change of mind and try to get out of their deal with you? When it comes to money (especially lack of) and a person's home, some borrowers will fight hard and some will play dirty. The potential for this kind of headache makes me not consider this kind of idea for very long since there's plenty of money to be made as a lender without partnering up with your borrower.

    I like to keep things separate. I'm the lender and only the lender. The borrower is only the borrower and not my business partner. I keep things at arms length and know that my servicer is handling the compliance piece.

  • Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    I’m guesiding they couldn’t get a standard owner occupied loan, which better than 95% will be doing. 

  • Midlothian, VA · Member since 2013 · 130 posts · 17 votes
    7y
    @Chris Seveney Yeah, I thought that might be an issue depending upon the (nanny) state.
  • Midlothian, VA · Member since 2013 · 130 posts · 17 votes
    7y
    @Andy Mirza Yeah the more I think about it the more I think it could turn out to be a bigger headache than it is worth. It might be worth it for a very high-priced area and home (assuming it is even legal) but for your average small deal, probably not.
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    7y

    @Patrick Sears

    Spoke with my attorney today and asked again. This is not legal on owner occupied homes

    7e investments53 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.