Posted by Woody (MI) on January 31, 2002 at 02:42:59:
Jay, in my experience most ads say something like “owner financing with 10% down”. Are you sure this ad said that owner will finance 10%? There is no standard amount an owner will carry but make sure you do your homework before you sign a contract. Good luck to you.
Woody
owner financing - Posted by Jay
Posted by Jay on January 25, 2002 at 20:17:26:
What are the upsides/downsides of dealing with owner financing? I’ve read about how investors have used this technique of creative financing and profited from it and it seems like it’s a good deal but I’d like to know more before I try it myself. I seem to see more FSBO signs than vacant properties in good neighborhoods so I am wondering if finding owner financing deals are more abundant than finding the fixer upper properties? Which of these deals would be more attractive to a new investor? Just a couple of questions… all replies are appreciated!
Re: owner financing - Posted by Brent_IL
Posted by Brent_IL on January 27, 2002 at 06:27:42:
I don’t think it’s a real comparison. The terms of an owner-financing agreement can be just as onerous as a bank loan. The major difference is that you have a chance to influence the owner, while the bank is offering almost an adhesion contract.
The profit in fixer-uppers is earned by buying at an acceptable discount to the ARV.
The profit in owner-financed properties is earned by buying with terms that effectively discount the purchase price to an acceptable amount.
They’re not mutually exclusive. Most of the time it’s mix-and-match.
Re: owner financing - Posted by Woody (MI)
Posted by Woody (MI) on January 26, 2002 at 04:47:01:
Hi Jay
First of all, don’t confuse FSBO with seller financing. Just because a property is for sale by owner doesn’t mean that they will finance it. On the other hand, if it’s not FSBO, that doesn’t mean that they won’t owner finance. Owner financing is usually dependant on the motivation of the seller. Most don’t want to owner finance until they have no other choice.
You will probably find that fixer deals will, many times, go hand-in-hand with owner financing. Banks don’t like fixers too much so the sellers sometimes have a hard time finding buyers without some seller financing.
Woody
Re: owner financing - Posted by Jay
Posted by Jay on January 27, 2002 at 19:38:59:
I understand the fixer-upper properties but I don’t get how someone can profit from a deal where the owner is financing it. Doesn’t that generally mean that you are purchasing the property from the owner and he is basically acting as the bank? How can the buyer of a property in this situation profit from it?
Re: owner financing - Posted by Woody (MI)
Posted by Woody (MI) on January 28, 2002 at 03:58:08:
Jay,
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.
Woody
Re: owner financing - Posted by Jay
Posted by Jay on January 28, 2002 at 22:52:06:
Woody, that sounds great. Lately I have been getting together a list of cash buyers and I want to line up a couple of properties to assign to one of these buyers. I hear a lot of mixed advice about owner financing deals that they are difficult to locate. I know I am going to have to bring the buyers to me so I am being patient. There have been plenty of techniques I’ve read about finding motivated sellers but has there been any that you have been most successful using? If so, which ones? How willing are some owners about coming down on the price to sell their home? Looking forward to replies. Thanks!!
Re: owner financing - Posted by Woody (MI)
Posted by Woody (MI) on January 29, 2002 at 02:09:18:
Jay, owner financed deals ARE sometimes hard to find. NOBODY wants to carry financing. Everybody wants to cash out. But that doesnt always work, especially with a rehab. I haven’t found any particular technique that works better than another for locating motivated sellers.
As far as sellers coming down on their price, well, cash is king. Most everybody builds a little “haggle” room into their asking price and expects to come down a little. However, most still don’t want to, or can’t, come down to where I want them to be. Good luck
Woody
Re: owner financing - Posted by Jay
Posted by Jay on January 29, 2002 at 16:56:07:
Thanks for your comments. Today I read throught the real estate section from the Sunday paper and I saw a couple of leads that might turn out to be something. One ad stated the owner would carry 10%. Is 10% generally the standard? Would I be asking too much for the person to carry 20%? My main interest would be to assign it anyway. If it does turn out to be something, I don’t want to blow the deal by asking for too much.