Rental to Owner Finance?

[dodge man]

It’s always nice to be a good person but sometimes you have to look out for number one. LD1 really hit it on the head with hard numbers. If you gave them a break on the house that’s one thing but we are talking big bucks. It doesn’t matter what you paid for it, it’s what’s it’s worth now.

 

[USAFpj]

Dave, these numbers are important, like you said. Plus, how are my Dodge projects going to get finalized without cash flow?

 

[MossRoad]

Dave, these numbers are important, like you said. Plus, how are my Dodge projects going to get finalized without cash flow?

Well that's a deal breaker!

 

[Larry Caldwell]

LD1, may I ask where you're number came from? My financial uptake is slow Basically, they will continue to provide us rent for the next 15 years, it just has simply went from $1400 to $2100. If, for any reason payments are dropped, the house is still in my name, and all of that cash is forfeited.

My math shows $5K down, then $2100 x 12 x 15 equates to $383k

Remember that if sold the house outright, that profit will be used to become debt free. I understand the compounding interest component, but I need to clear debt first.

You need to insist that they have an attorney. It's only fair that they understand what they are getting into. First time buyers are a pretty ignorant bunch when it comes to real estate purchases.

 

[3Ts]

It's one of the problems with doing business with family or friends.

Definitely a problem. I co-signed a loan for a family member (I checked to be sure I could take over all payments etc.) but even doing the co-signing it did not turn out well. Beyond the finance issues the family doesn't speak to each other anymore. Bottom line, don't get into financial arrangements with anyone you want to keep as a friend.

 

[MossRoad]

Definitely a problem. I co-signed a loan for a family member (I checked to be sure I could take over all payments etc.) but even doing the co-signing it did not turn out well. Beyond the finance issues the family doesn't speak to each other anymore. Bottom line, don't get into financial arrangements with anyone you want to keep as a friend.

My father gave a loan to a sibling of mine to buy a business, and made them sign a promissory note. Sibling made payments fine. Father passed away. Left an estate. Estate had to call in the promissory note. Fortunately, there was enough money in the estate to be split between us 5 siblings. The one with the promissory note got 1/5 of the estate, less the balance of the loan, which was put back into the estate. That loan balance in the estate was then distributed to all 5 siblings. So the one with the loan got 1/5 of their payment in full back. Math hurts.

Anyhow all 5 of us were satisfied and there were no arguments. It was a business transaction. No feelings hurt. I'm very fortunate to have reasonable siblings.

 

[ponytug]

Following up on @LD1's math, how would you feel about selling the house today for $450k, pocketing $300k, and donating $150k to the pastor (or his church, though one is somewhat deductible, the other not at all)? It is perhaps another way to look at the transaction.

All the best,

Peter

 

[ultrarunner]

I've been on both sides and always a win/win and currently I have a seller financed mortgage.

Real Estates agents hate these and generally will try to sink any deal.

My previous one had been listed but home needed work to be able to meet underwriting... sellers age 85 didn't have the money for repairs.

I put 50% down from the sale of my home and sellers carried 50% and sellers considered the smartest savvy in their retirement community for getting 3x CD rate...

When rates dropped I mentioned I was going to pay off as all work needed was done.

They said do what is best for me but they are going to miss the extra income and suggested dropping rate and keeping the mortgage which we did.

Truly, their retired friends bemoaned low CD rates taking a toll but my sellers did not have this problem... Each month I dropped off the check on or before the first...

My concern is overbids are norm in today's market... 30-25% more than asking common... you could be greatly under valuing property.

This week I let first right of refusal go even with a 30k advantage which realtor agreed to honor.

Property listed 1m and in contract 10 days later at 1.4m. Parties asked if I plan to exercise purchase at 1,370,000 and I said no...

Another way would be a 30 year due in 7 or 5 or even 3 years... it gets them in with everyone understanding the clock is ticking for a reset down the road

My current is 4% and I could do better but the money is needed by seller and prop has appreciated nicely over the last 4 years so I am happy to pay 4% knowing only 3 years left on my 7 year loan...

 

[jigs_n_fixtures]

I quit working at 32, and went back to college, so 4-years later when I graduated, I had basically no credit and student loans I needed to pay off before the interest jumped up, five years after graduation.

I had a couple i had known for about ten years. He had worked on a survey crew I ran for a couple of summers, when he was in college and then a for a year after he graduated. I had worked with her for about six years. Before she quit to go back to school. and she and I were working for the same Engineering firm.

They wanted to buy a new home, and needed to get their existing house under contract to qualify for the mortgage on the new house.

Her parents were both licensed realtors, and her brother was an attorney. We all met for breakfast and did a Lease to Purchase contract. I leased teh house for five years. I was paying a couple of hundred above their mortgage payment, and that went into an escrow fund, whihc could be used for emergency repairs, and any that wasn’t needed for repairs was to be used as a down payment when I got a mortgage to buy the house. We locked the sales price at the beginning of the agreement, and five years later when i was out of debt, and had rebuilt my credit, the house had increased about 25% in value.

So, I didn’t have to pay the PMI on the mortgage. worked out well for all of us.

 

[workinonit]

Owner financing is pretty normal around my area of SC. It's typically not done later in life to supplement income but it is a really good way for both parties to get what they want. That said you should never loan money or finance a home without charging interest and never, ever do it without involving an attorney.