I Want To Sell With Owner Financing. How Do I Set This Up?

Comments(6)

• 
  commercialking14th June, 2004

  so what are the terms of your underlying note, other than the prepayment penalty?
  
  The short answer is not to prepay the note. Sell on land contract.Keep the underlying financing in www.place.Make sure the payments on the new land contract are always higher than the underlying loan payments and that the balance of the land contract is always more than the balance of the underlying loan. Do not, for example, sell on a 15 year amortization when your underlying note is on a 30 year schedule or there will be a day, not too many years out when they owe you less than you owe on your note and you will have to come out-of-pocket to close.

• 
  REPrincess14th June, 2004

  Quote:
  On 2004-06-14 20:31, commercialking wrote:
  so what are the terms of your underlying note, other than the prepayment penalty?
  
  
  
  2/28yr ARM payment is 399.00 for first 2 years, then 421.00 for 28yrs. taxes are about 75.00 a month and Insurance is 40.00 a month. 514.00 a month. Rents are easily 650 - 700 a month. I want to create a win win for this investor as well as me. I am sure she will refinance after a year or two.
  
  I was thinking about a L/O as well. Any thoughts?
  
  [ Edited by REPrincess on Date 06/15/2004 ]

• 
  active_re_investor28th June, 2004

  As noted you might find the pre-payment if only on refinance deals.
  
  Otherwise if you sell on a land contact you can wrap the 1st with your second and collect a blended rate where you are actually making money on the debt covered by the 1st.
  
  A completely different solution is to offer a lease/option and have the option set so the buyer can cash you out after the pre-payment period is up.
  
  In any situation it will not be that hard to make this work.
  
  John
  [addsig]

• 
  davese29th June, 2004

  Active RE,
  
  Could you eloborate on how this would be done? This sounds interesting and would like to know more about how to do this on my properties and how I would be making money on the debt covered by the first.
  
  
  Thank You
  Dave
  
  
  sell on a land contact you can wrap the 1st with your second and collect a blended rate where you are actually making money on the debt covered by the 1st.
  
  
  Quote:
  On 2004-06-28 12:08, active_re_investor wrote:
  As noted you might find the pre-payment if only on refinance deals.
  
  Otherwise if you sell on a land contact you can wrap the 1st with your second and collect a blended rate where you are actually making money on the debt covered by the 1st.
  
  A completely different solution is to offer a lease/option and have the option set so the buyer can cash you out after the pre-payment period is up.
  
  In any situation it will not be that hard to make this work.
  
  John

• 
  active_re_investor29th June, 2004

  The principle in any wrap is the same.
  
  Simple example.
  
  You own 50K on the 1st. It is at 5.5% amortized.
  
  You want to sell for 100K and are accepting 20K as the down payment.
  
  A note is created for 80K with the interest rate set at 6.5% amortized.
  
  All the details about the title, the existing loan, etc are fully declared so the buyer knows the details.
  
  They pay you (most likely using a collection account) each month. The payment on the 80K at 6.5% comes in to the collection service. They then send out a payment to the lender on the 1st for what is owned. The balance is paid to you. You earn 6.5% on the 30K and 1% on the 50K. The buyer is getting a blended rate that is attractive to them.
  
  All the normal issues with DOS and having the correct documents set up in escrow.
  
  John
  [addsig]

• 
  davese29th June, 2004

  Thank you John,
  
  So would you use a loan servicing company to do this? Buyer pays LSC, LSC pays Mtg Co, LSC sends you the diff?
  
  Dave