To Rent or to Sell with Owner Financing - Posted by Steve Heller

Posted by Steve-Atl on February 01, 2000 at 07:32:28:

Sure. Try selling on lease option. I heard someone say that lease option is his favorite way to sell a house that he wants to keep. The reason: left to their own, most tenant/buyers do not exercise their option, leaving the option fee behind. Yet they have an ownership mentality. They generally take care of the property and sometimes actually improve it.

I have four properties out on lease option. All gave me $5k to $7k down, all pay their rent on time, all are keeping the property maintained, and I don’t really care if they exercise their option cause I know I can quickly put someone else in there for another $5k-$7k down. If they don’t pay, they are evicted as tenants.

To Rent or to Sell with Owner Financing - Posted by Steve Heller

Posted by Steve Heller on February 01, 2000 at 06:19:34:

I have some rental properties and am thinking owner financing might be the way to go in the future. With owner financing one is not involved with repairs and maintenance. But, it seems that with owner financing you could have major problems if the buyer/tenant does not pay and you have to foreclose. Anyone had any experience with this? Is there anyway you could structure an owner-financing deal as an sale/lease, where it’s a sale as long as they pay but if they don’t pay it becomes a lease where you could evict them for not paying?
Steve (Tulsa)

Re: To Rent or to Sell with Owner Financing - Posted by Judy Miller - American Note

Posted by Judy Miller - American Note on February 01, 2000 at 15:10:11:

You have to decide what the benefits would be to you to rent vs sell, or even lease option. If you sell, you pass on the repairs, maintenance and taxes, which a landlord would retain. However, yes, if they default on payments, you must foreclose.

Solutions or options: If you get enough of a down payment, and you pre-qualify your buyer, usually they are invested enough that they aren’t going to default, or if they do, you may be in good enough position due to the equity they leave on the table. However, foreclosure is a hassle, can be difficult in mortgage states (vs trust deed states where it is much simpler), and the property may be destroyed in the meantime.

You could elect to sell on Contract for Deed/Agreement for Deed/Land Contract where you retain title until they’ve paid their last payment years from now, and if they default, it is much easier to get them out of the property. In this way, you can have them pay the taxes. This is the typical “owner-financing” way we suggest when you feel that default is a risk.

On another hand, you can elect to sell the note you create through an owner-financing, whereby there is no recourse to you, and the hassle will be someone else’s.

If you have any questions on this and if I can be of help, please let me know. Thanks, Judy