I manage a small fund (less than $1M). To date, we've been joint venturing with other investors on flips and subto deals. I am now looking into how we can make owner financing the base of our business. I've been exploring what does a sustainable model for this looks like? ;
Here are some of the models I've considered. I'm not sure how likely some of them are. Has anyone had any long-term success in any of these or other models? Thank you.
Scenario A
1. Purchase the homes, make minor repairs, and sell with owner financing to create the notes.
2. Sell the notes to note buyers. Rinse and repeat.
Pros: No long term responsibility for the note. If I know what kind of notes the buyer wants, I can work backward from there in structuring the notes, properties, and buyers.
Cons: Discounts and other criteria from note buyers might make it difficult to find enough good opportunities.
Scenario B
1. Purchase the homes, make minor repairs, and sell with owner financing to create the notes.
2. Borrow against the notes or cashflow through a bank as a portfolio loan, business loan, or business line of credit. Rinse and repeat.
Pros: Repeatable and predictable. We still own the note and cashflow after bank loan is paid off.
Cons: Finding a bank to do it. Qualification. Limits. Terms.
Scenario C
1. Purchase the homes, make minor repairs, and refinance through traditional lender.
2. After refinancing each property, sell on a note.
Pros: Due on sale. Longer process per house. Will the bank continue to refinance us if they see that past houses have been transferred.
