Re: owner financing - Posted by Woody (MI)
Posted by Woody (MI) on January 28, 2002 at 03:58:08:
Yes, the owner is basically acting as the bank. The way you profit from any property, not just owner financed ones, is by buying at below market values. YOu also don’t have loan origination fees, closing fees, points or any of the other fees that banks might hit you with. Basically owner financing is a convenience. Your profit normally comes when you buy. If you were to buy a house and you were paying $40K to the owner and you sold it at $60K to a new buyer, would you profit from that? Sure you would. You would also profit on that if t was bank financed. Would the bank let you qualify for a $100K house if you already own a $100K home? Perhaps you could, I couldn’t. An owner, on the other hand, normally doesn’t care how much you make or what your credit is like, they just want their money. Another example mght be that you find a house below market and want to assign your owner financed contract to another buyer. The owner will normally be OK with this. The bank might not be. You might make 3 or 4K on this type of flip but not if the bank says no.
As said before, owner financing is a convenience. No waiting for loan approval, no worrying that you will be turned down for one reason or another. Possibly no money out of your pocket. No money of my own in a deal makes it profitable to me. With a bank they almost always want to see some of your own money in it.
I hope this helps.