bcpilot

One has to ask, why would a seller in their right mind, agree to carry loan for a buyer & seller financing?? If someone can sell & get all the money today, why would he wait 5, 10, 15, 20 or 30 yrs for the money???
ONLY BECAUSE HE CAN'T SELL THAT PROPERTY IN THE OPEN MARKET TODAY, either because of financing or price or the condition/location of the property itself......

ryguy

I just searched the Houston MLS and there are currently 714 owner finance properties available for sale. It should be in the MLS for most places but I'm not sure if your local MLS will have it available on the public side. That also doesn't mean they are all good investment properties either. In fact many won't be as owner finance has become an extremely popular way for investors to get rid of houses retail right now. If you need to, just work with a Realtor or become one so you can gain access to your MLS. It isn't too difficult or expensive to maintain your license. You just park it with a flat fee broker and then you can also list your own properties when it comes time to sell or lease.

"Subject to" is also a popular way for newer investors to get into the game as others have mentioned. It takes a unique situation for it to work though. If you are short on cash then you need a decent discount without a lot of rehab because that rehab will be out of pocket.

The best way for new folks to start is by wholesaling. It's a decent amount of work but not a lot of cash. Once you build up some cash then roll that into your first rehab. Throughout your career rehab some and wholesale some to keep the cash flow going. Lots of hungry investors out there that are tired of writing 20 offers on REOs a month just waiting to get a deal. Many aren't interested in finding the deals and will pay your wholesale fee gladly.

bcpilot

While I see quite a few seller carry-back financings of a small portion of the loan on the 2nd lien position or sometimes the whole loan, it happens more on certain commercial, special use properties, the ones where it is very difficult to obtain financing from SBA or conventional lenders.....
Like the ones with haz matt soil or environment issues......

For the FSBO,(FOR SALE BY OWNER) how many do you see out there, may be 1 in 10,000.......

If you are not into buying short sales, you are missing something.....

ryguy

You would be surprised. Many sell with owner finance on a balloon note. They don't intend to hold the paper that long. Services have sprung up that report the private note to the credit bureaus. That helps the borrower get their credit up and then refi out. A refi is a lot easier to get than an origination. FHA credit requirements are sitting at a 600 credit score (down from 620 a year ago) and they used to be 580. There are a whole lot of buyers out there in that 20 point spread and a performing home loan will get them over that hump relatively quickly. That's assuming they make their payments.

Many investment grade houses are in areas that the buyer population can't get a traditional loan. That is why owner finance has made such a large comeback.

bcpilot

So, If the investors are agreeing to owner financing, they know that property would not appraise at that sellng price & banks would not lend above apprasied value.....they are selling typically 10-20% above what the property is worth & 20% above means 20,000 above value for a 100,000 house... That could be a life time woth of appreciation.....

1st time buyers can get a FHA loan with only 3.5% down & the FHA good neighbor programs are even lower for teacher, firefighters.
VA is 100% financing all the upto 800k for those who qualify....

Csy Mon

Been doing it the last 3 years:

Buy, fix up, rent out.

1 straight sale, 2 short sales, 1 auction.
So far, so good. Netting almost $2K a month after all expenses paid, looking for more. Buy cheap, have cash ready.

ryguy

Most of the time it isn't an appraisal issue it is a credit issue. They aren't always in the best neighborhoods. Some are properties that need rehab and the seller is willing to carry the note because it isn't in retail condition. Of course that still takes us back to the new investor who needs all of this because they do not have the cash so they can't do the rehab out of pocket. However, yes, most of the time the buyer will end up paying a premium but not 20%. At least not those of us that want them to be able to refi out in a year or two. For a guy that is going to hold the paper long term, yes, that is pretty common. I almost always sell at a discount to move the property quickly. However, an owner finance will pay the full retail value. What these guys need is Joe Homeseller and not an investor. They are out there, just takes some work to find them.

Short sales are great if you want to wait them out. While they are more prevalent lately, the discount is typically not enough for me. If I get a lead on a short sale candidate I refer it to another Realtor that specializes in them and get the referral. The last one we did was a great example of this. They owed $84K and were behind about 2 months. The ARV on the property was only $105K and it needed roughly $8K for rental rehab or around $17K for a retail rehab. In our model we would only offer around $51K so I passed it off. They sold it for $82K to an owner occupant that got a deal. For them it was a great deal but it wasn't a money maker for us.

Of all the short sale deals we have been under contract on only one closed. We kept that one as a rental and still have it. We chase fresh leads though so don't really chase REOs and short sales. Too much competition pushing the prices up.

bcpilot

You agree that people with low credit don't really get the best deals;
And that's exactly my point......

We are talking about investing here, not 1st time buyers...

PROFIT IS MADE WHEN YOU PURCHASE, YOU JUST ENCASH THE PROFIT, WHEN YOU SELL....

I am not at all saying that guys with LOW credit scores have no right to buy a home or pusue their dreams but what I am saying is that investing is a serious business & requires a lot of financial discipline & reserves....

If some one is a 580 or 600 FICO, then 1st thing he needs to understand is why is he 580 or 600???
Most likely due to high credit card debt & collections and or late payments...

This type of guy with a 580 - 600 fico, needs to first get his own house in order, bring his credit accounts current, lower the revolving credit balance, save some some money for reserves & repairs....

Then he should think about real estate investing.....
Every property owner should have 3-6 months of payments in reserves, plus some money for unforeseen repairs.....

Even with 1st time buyers, If there are collections, the collection agencies will purse him & soon as collection companies find out you own a property, they will get a judgement & put a lien on the property.....

If anyone thinks otherwise, they are living in eutopia....

flap

If a person is has substantial equity, and does not need to tap that for buying a new property, then they have a problem of where to put a lump sum that will generate any meaninful returns. A 1% CD is not that attractive, but a monthly payment based on 5% amortization is something they are interested in.

As you said, in this market it can be tough for sellers. Offering to carry the note is sure way to ensure that there are no issues with appraisals or credit issues.

ClutchCargo

Pity that you didn't put as much effort into researching and networking your aviation career (such as it was).

Something doesn't jive here... you have many times stated that you were so poor as a pilot you had to live in your car. Yet here you were buying, selling and building homes the whole time...

As usual with your tales something doesn't seem quite right.

Best regards,
Clutch