Get Owner Financing for Your Income Property

Some property owners are so anxious to sell they will overlook your credit rating and credit history. You must, of course, convince the seller that you will do a good job of managing the property you're taking over. To get owner financing (also called seller financing), take these easy steps:

1. Look for property ads saying "Owner financing,"Financing available, or any other version of these thoughts. You may be able to find such offers in your local large-city Sunday newspaper ads.

2. Contact the advertiser quickly. Don't wait! The offer may be snatched from your hands in just moments. Call, or visit, the advertiser as soon as you can.

3. Analyze the property immediately. Do a quick figuring of your Gross Rent Multiplier (GRM) by dividing the Price of the property by the Annual income of the property. If your GRM is between three and seven, you're on to a possible fortune. (I, as your author, will do a full free analysis of the numbers of your property if you're a one-year, or longer, subscriber to either of my wealth newsletters described at the back of this article.)

4. Make a verbal offer on the property, subject to the owner financing both the long-term mortgage (15 years, or longer) and the down payment, if your attorney later approves of the purchase. Such an offer should hold the property long enough for you to contact your attorney and get a quick opinion as to the legal aspects of your purchase.

5. Move ahead with buying the income property if the numbers work out (you MUST have a PCF) and your attorney believes there are no legal risks for you.

6. Improve the property where it needs work, using outside contractors if you can't do the work yourself. Then rent the property for a monthly PCF, or flip it for a profit.Owner financing can usually help you reach your financial goals, no matter what your credit rating is!

Why Consider Owner, or Seller, Financing?

Now why do I recommend that you consider owner, or seller, financing? There are a number of good reasons why you can benefit from owner financing, including:

You negotiate with just one person, the seller. This means you don't have to make a trip to the lender's office. You save time, energy, and money!
You don't have to be interviewed by a lender. Why? Because your seller is your lender! You're being "interviewed while you're negotiating the sales price.
Bad credit/no credit may be acceptable to the seller because he or she sees how honest and reliable you are. And such a seller is often willing to overlook a few past problems because he or she has probably had the same challenges. Or perhaps someone in his or her family has had similar credit problems.
The loan terms offered by private sellers are often much more flexible than those forced on you by banks and other mortgage lenders. So you have greater freedom in negotiating your loan payment schedule and amount.
You can arrange an installment sale so the seller has a smaller tax burden and is more willing to sell to you. To be sure you get the property, you can offer the seller his or her asking price. Nothing makes a seller happier than being paid the asking price! Your seller will be more willing to agree to monthly payments (an installment sale) because he or she is getting the asking price and saving taxes. Win/win for you and the seller!
Most seller financing deals go through without a credit check. So your credit score is not reviewed. This means you have one less inquiry on your Credit Report. Result? Your FICO score does not go down because of an inquiry.
To make your seller happier you can name him or her as the beneficiary on the property insurance policies until such time as you have reached a certain repayment level. This means that in the event of a fire, tornado, hurricane, or other disaster, the seller's asset is protected by insurance. Any payments you have made will also be covered by the insurance.
Seller financing is an excellent way to transfer property that is otherwise nonfinanciable because it does not meet lender requirements. Thus, if a property fails building code rules but you can bring it into compliance because you have access to competent mechanics, seller financing is the way to go.
Your seller will usually be delighted that you have an attorney review the terms of the deal. Why? Because the attorney also (in a way) protects the seller because the deal meets the local legal requirements. And a competent attorney will demand that a title search be made, to protect you. Likewise, your attorney will demand a termite inspection of the property again to protect you.
Some sellers will agree to an interest-only loan to ensure that the deal goes through.While an interest-only loan has risks for you (see article 3), this type of loan can get you the property you seek.
As a final step in getting seller financing you can have your attorney prepare papers to assign the deed to the seller.Why? In the event that you fail to make the required payments the seller can recover his or her property without a complex foreclosure action. This saves time and money. But it also gives the seller one more good reason to offer you 100 percent financing regardless of your credit rating or history of a bankruptcy. Again,WIN/WIN!

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Get Owner Financing for Your Income Property

Why Consider Owner, or Seller, Financing?

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