First Time closed 2 Owner Finance deals same day - WE LIKE IT!!

[Vijaianand Thirunageswaram]

How you doing folks?  

Jan is already gone and only 11 months more on this year... Wow, time is flying fast...

Anyway, I was just excited to share that last month, last day  we closed two owner financing deals back to back. It was our first time doing it but all went per plan and closed as plan. Actually one of them we closed week early because we were able to get the paper work done quick and every thing worked out as expected and buyer wants to close early so we got it done.

How I end up starting out? 

I been wanting to do owner financing ever since I attended REI meeting last year. Guy who talked about owner financing really peaked my interest and I talked to my wife and she also liked the idea. So we were looking for a way to start it out. At that same time last year we bought our 5th property for flip but didn't able to sell due to market slow down and bad contractor job. We were trying for rental as our back up plan. Rent also didn't go quickly as expected due to slow Holiday months. That's when we thought why can't we try out owner financing. We quickly refinanced our Private loan to high 6.25% interest loan and listed for owner financing in Jan 2019. It went under contract immediately the same week and we closed end of the month.

What are the NUMBERS?

1st Lien - $125,500 - 6.25% - Montly payment - $771.90

Sale Price - $175,000 - $1000 contribution = $174,000

Down payment - 10%

2nd Lien (our finance) - $157, 500  - 

Interest rate - $9.95 , 8/1/1 ARM - 20 year Amortization

Monthly  Payment - $1425.66, Escrow paid by Borrower

Cashflow: $653 (before tax) - 

That's damn good cash flow. We are out of the property and as well made ourselves good check every month. 

Con: As usual risk factor on the 1st lien being called by the lender. We talked to many investors who are doing it and everyone said the same thing, don't worry it will never happen. We also hope so as well.  

Secondly if they don't pay after a year or so, we can foreclose and get the property back and put it back in the market. We got 10% down payment to support if funds are needed. We hope they won't because 10% almost $20k after all their closing cost is paid by them. That's lot of money for these folks. 

On our 2nd one, we bought that property to keep it as rental because my wife loved the area. But I kept telling her numbers didn't work due the HOA and High taxes and want to get rid of it. We put it up for sale and owner financing and got it sold.

Numbers

Cash Purchase: $141,500

Rehab: $1500

Sale Price: $177,000 - Seller Contribution $1500 = $175,500

1st Lien (our Loan) - $159, 300

Interest: 10% - 30 year Amortization

Monthly Payment - 1397.97, Escrow paid by Borrower

Cashflow - $1397.97 (before taxes)

We are totally blown away by this opportunity to expand our cash flow. So we connected with the agents who deal with owner financing buyers and plan to do more.. Only issue, we need non-conventional loan for 6-7% or cash. Our DTI won't help much since we already have 5 rentals and this owner financing mortgage will show up as well. So I am looking for lender who can do 6-7% long term without NO Due clause. Let's see I get lucky...

It's good start for this year and hope to continue this momentum.. 

[Michael Ealy]

Originally posted by @Vijaianand Thirunageswaram:

How you doing folks?  

Jan is already gone and only 11 months more on this year... Wow, time is flying fast...

Anyway, I was just excited to share that last month, last day  we closed two owner financing deals back to back. It was our first time doing it but all went per plan and closed as plan. Actually one of them we closed week early because we were able to get the paper work done quick and every thing worked out as expected and buyer wants to close early so we got it done.

How I end up starting out? 

I been wanting to do owner financing ever since I attended REI meeting last year. Guy who talked about owner financing really peaked my interest and I talked to my wife and she also liked the idea. So we were looking for a way to start it out. At that same time last year we bought our 5th property for flip but didn't able to sell due to market slow down and bad contractor job. We were trying for rental as our back up plan. Rent also didn't go quickly as expected due to slow Holiday months. That's when we thought why can't we try out owner financing. We quickly refinanced our Private loan to high 6.25% interest loan and listed for owner financing in Jan 2019. It went under contract immediately the same week and we closed end of the month.

What are the NUMBERS?

1st Lien - $125,500 - 6.25% - Montly payment - $771.90

Sale Price - $175,000 - $1000 contribution = $174,000

Down payment - 10%

2nd Lien (our finance) - $157, 500  - 

Interest rate - $9.95 , 8/1/1 ARM - 20 year Amortization

Monthly  Payment - $1425.66, Escrow paid by Borrower

Cashflow: $653 (before tax) - 

That's damn good cash flow. We are out of the property and as well made ourselves good check every month. 

Con: As usual risk factor on the 1st lien being called by the lender. We talked to many investors who are doing it and everyone said the same thing, don't worry it will never happen. We also hope so as well.  

Secondly if they don't pay after a year or so, we can foreclose and get the property back and put it back in the market. We got 10% down payment to support if funds are needed. We hope they won't because 10% almost $20k after all their closing cost is paid by them. That's lot of money for these folks. 

On our 2nd one, we bought that property to keep it as rental because my wife loved the area. But I kept telling her numbers didn't work due the HOA and High taxes and want to get rid of it. We put it up for sale and owner financing and got it sold.

Numbers

Cash Purchase: $141,500

Rehab: $1500

Sale Price: $177,000 - Seller Contribution $1500 = $175,500

1st Lien (our Loan) - $159, 300

Interest: 10% - 30 year Amortization

Monthly Payment - 1397.97, Escrow paid by Borrower

Cashflow - $1397.97 (before taxes)

We are totally blown away by this opportunity to expand our cash flow. So we connected with the agents who deal with owner financing buyers and plan to do more.. Only issue, we need non-conventional loan for 6-7% or cash. Our DTI won't help much since we already have 5 rentals and this owner financing mortgage will show up as well. So I am looking for lender who can do 6-7% long term without NO Due clause. Let's see I get lucky...

It's good start for this year and hope to continue this momentum.. 

Congrats man!

Those are solid numbers.

Here's my suggestion for your dilemma of your DTI being maxed out since you already bought 5 properties.

Why not BUY properties using owner financing as well?

Then you sell using owner financing!

The key is buying the property with little to no money down at a 10-20% equity (and low interest) and then selling them at 5-10% higher than market get 10% downpayment and charge them a little bit higher interest.