All Forum Posts by: Tom S.

I agree that seller financing does not increase the value a property. But it can make it more attractive to an investor.

If someone comes in with a cash offer, I'll certainly sell for less than appraised value.
But sometimes investors will ask me to carry a 2nd in return for paying full price (appraised value). In that case, I get a higher value when selling, and the investor gets cash now for the 2nd.

- Tom

Just to chime in, as I've done a number of owner finance deals, both buying and selling:

Reasons I have owner financed to buy:

- Quicker qualification and close.
- House needs rehab and doesn't qualify for conventional financing
- Typically doesn't show on my credit

Reasons I have offered owner financing to sell:

- Obtain a higher sales price
- Defer taxes
- Broaden my appeal to investors and be more flexible to get the deal done.

Hope that helps,

- Tom

Hi Danny,

Thanks for posting all these details - it's a great read! Just curious, on 5/7 you said someone was writing an offer - did that not come through? Or are you doing the open house this Sunday for backup offers?

Thanks,

Tom

Hi Aaron - welcome!

Regarding the 50% rule and "where does the other $800 month go" question you had, it's the other expenses that happen over time with a rental property. For example, vacancy, rent concessions, legal fees, and capital improvements, to name a few.

Be sure to factor those in for the long term. Still seems like a decent deal and a good overall plan you have.

- Tom

One more item to throw into the mix: tax benefits. I don't know your situation but generally when purchasing a house as your primary residence, you write off all the interest. With a rental property, you're capped at $25k in write offs. That $25k cap also gets phased out with higher income levels.

Again, it all depends on your situation, but for me it's one of the reasons I bought my primary residence first, then started buying income properties.

- Tom

One item to note, typically the lender will want to see two years of tax returns before they'll count the rental income. Even then, they'll discount the rent by a flat amount.

Personally I found it better to purchase my principal residence first, save for a few more years, and then start with investment property.

- Tom

Here in Vermont most houses are typically older, with many in the 1870 - 1900 time period. We purchase and renovate them completely, and haven't had any issues as long as the numbers work. Most were really well built back then (post and beam construction).

As long as you can buy them for $40k, renovate for $70k, and comps are $170k, it works out well. As a side note, we typically avoid houses from the 1950's and 60's. It seems the ranch style house was all the rage back then, but prefer classic Victorian / New England styles.

- Tom

To add to what J Scott said, portfolio lenders (local banks that will hold your loan in-house) are a source to try. Typically they will look at other factors such as your income, cash reserves, and track record, beyond just your credit score.

- Tom

I always put two key clauses in my tenant leases:

- Owner not responsible for any vehicle damage.

- Tenants to carry renters insurance, as owners policy does not cover any tenant losses.

Hope that helps,

- Tom

It also depends on your state. I work mainly in the state of VT, and can simply go to their website under "landlord-tenant" law, and see the exact wording.

For instance, you have 14 days after time of move out to return the deposit, and have to itemize any deductions. I've basically copied and pasted that wording from the website into my lease, and update it once per year if and when the state does.

- Tom