All Forum Posts by: Travis Felchlia

The government needs its property taxes. The investor provides this when the owner doesn't so that the government can provide essential services to its citizens.  

This is not predatory since the government is initiating the tax lien sale in the first place.

Hey @Travis Felchlia - Seems like you received a ton of great advice above.  We are always trying to pull off seller financing on our Chicago deals. If you are ever in the city and want to link up feel free to reach out and we can talk through the process.

Staying there two years makes a huge difference with capital gains taxes so consider that with your plans. And you're right, you'll have to search hard for a broker who's familiar with the 203k loan. Most of them churn the typical FHA loan for a standard buyer. Have you searched the Network here on BP? Top tool bar, Network -> Mortgage Lenders... you'll find some there who can help.

His question is: is this going to be your home, that you live in for a period of time, and not an investment property right away? Like your primary residence? If so, seller financing makes little sense. FHA loans will be a much easier path to get into so many more homes. Seller financing requires a pretty specific situation and a very large portion of homes listed aren't going to match that.

In your original post, you mention BRRRR and first home and remodel... all that leads me and the other commenter to believe this is your house you'll be living in. Find a good mortgage broker locally, get that squared away with a more conventional loan and you'll be on your way. You should look at a 203k loan which allows you to borrow for the house PLUS the renovations. You pay just the 3.5% down on the loan total so you don't have to come up with the reno costs out of your pocket. Seems like a good strategy given your stated lack of funds.

Have you searched here on BP for mortgage brokers in your area? I'd almost guarantee there's one close by you and they will know all the ins and outs to get you setup!

@Travis Felchlia

A bank isn’t involved in a seller-financed sale; the buyer and seller make the arrangements themselves. They draw up a promissory note setting out the interest rate, schedule of payments from buyer to seller, and the consequences should the buyer default on those obligations. Unlike a sale involving a mortgage, there is no transfer of the principal from buyer to seller but merely an agreement to repay that sum over time.

With only two main players involved, owner financing can be quicker and cheaper than selling a home in the customary way. There is no waiting for the bank loan officer, underwriter, and legal department, and buyers can often get into a home for less money.

Read this article for more information https://www.investopedia.com/a...

Good Luck!

@Travis Felchlia Welcome to BP!  I'll lay out an real life example of one of the first seller finance deals I did.  $80k purchase price, 10% down, so the seller financed the rest: $72k, 6%, 30 year amortization (payments = $432 per month).  You're correct that most sellers won't wait the full 30 years for their money, most will insist on a balloon payment in 5-7 years.  So you make your payments for 5 years, and then the balance is due, typically you'll sell or refinance at that point.

In my case I put about $40k of rehab into it over 6 months.  I then went to a bank who appraised it at $170k.  They would lend 80% of that, or $136k.   I'm all in at $72k + 40k rehab = $112k.  So I'll net $24k after the refinance (less closing costs).  That reimburses my original $8k and then some, and I can use that for the next place.  And I still have 20% equity in the rehabbed property.

So it takes work but can be done.  Good luck!

Are you talking about seller financing your down payment to a mortgage? 

A normal seller financing would be the seller holds a promissory note from you that after you pay the seller the downpayment (whatever the amount you and the seller can agree on), you will pay the remaining balance over a period of time for an interest (same thing, whatever you guys agree on). Basically the seller is acting like a bank. 

Usually your Frannie Mae, Freddie Mac loans are much better than a seller financing deal. You would only go to exploit the seller financing route if either you can't get a conventional loan or for some reason you convinced the owner of the property to give you a better deal than conventional loan. It's very possible, if you are lucky, charming, or whatever found a kind person who's allow you to do that. 

From the owner's point, there is definitely higher risk from doing seller financing. So usually the owner might ask for higher interest than the market rate. Or the owner does not want to take a lump sum of cash but rather take an installment over a period of time (taxes, retirement, trust fund, could be any reason). 

Or, you could also convince the owner to take a second position after the bank. This creates even higher risk to the owner. Say if you'd like to purchase a house for $2Mil and you can only get $1Mil through the bank. You could ask the owner to seller finance the other $1Mil as a second mortgage. However, if you default on the bank's note and the bank foreclose on you, the bank will take the property away and the owner left with nothing. 

There are property owners out there who want to do seller finance to collect the initial down payment and then just hope the borrower default so they can foreclose on the borrower, take the property back and repeat. So these people make money on the down payment. 

All in all, seller financing is very flexible. Basically just comes down to what kind of agreement you can enter with the seller. As long as both of you are adults, with sound minds, not under durress, and there are nothing illegal act in the agreement, you can enter into any agreement to help you purchase the house. Just need to find a lawyer to do the contract.

@Travis Felchlia if this is going to be your first home, why aren't we considering a "primary home"?  Why not go that route?  Is something preventing you from going that direction?