Owner finance

[Lawrence Lloyd paclob]

aloha BP,

I would like to ask if anyone could give me your thoughts or more information about owner financing, I have talked with a seller that might be more interested in doing a owner finance instead of just selling their  property and getting a big chunk, she wants a steady income for x amount of years for her retirement, but question is would owner finance work if home needed major improvements and repairs? And if so how would it work and what strategy would you use to come up with the funds? Goal is to rehab the property and rent it out having a good amount of cash flow coming in, As you can see i am new to real estate investing and don't have much funds to do a rehab on the property, but I have funds to put a down payment. Thank you in advance 

[Adrien C.]

Owner financing is an easy concept to grasp when you treat the owner (also the seller) as the bank. Instead of making your mortgage payment to Wells Fargo, you are making it to the previous owner. If my house needs any repairs (minor/major/catastrophic), WF doesn't pay for them. I'm the owner and I pay for them. 

There are several ways to structure the financing with an owner. Sometimes I'll do interest only and give them a higher % rate. Sometimes I'll do the loan amortized but with a lower rate. You can add a balloon payment where the balance is due in full at a set time. It depends on my exit strategy and how long I intend to hold onto the property. As far as a down payment, If the property is pretty much move in ready, I'll aim for 10% down or less. If the house needs a lot of work, I try to get it for as little down as possible so i can have more liquid cash for rehab. I use the attorney with my title company to draft up the mortgage which is filed with county after closing. 

Hope this helps- good luck.