Why is offering owner financed homes such an attractive option for real estate investors? What are some of the advantages that investors need to be looking to take advantage of?
Be The Bank
Even in the wake of Dodd Frank, offering owner financed homes is well within the reach of even a beginning investor. You do need to get yourself an RLMO, or residential loan mortgage originator, if you are going to sell to owner occupants. There is a rule for small investors that you may not need an RLMO if you only do a deal or two a year, but I would highly recommend that you use one for every one of your owner financed transactions to an owner occupant.
The biggest advantage to offering owner financed homes is that you get to be the bank. You sit back and collect the check. There are no tenants or toilets, unexpected repairs to rental properties, or having to worry about vacancy. When you sell your property with a note, you generate the long term, passive income, without the majority of the long term management.
More Options For The Investor
I’m sure you’ve heard of creative investing, and maybe you never really thought of what it means, or maybe you thought it was just an abstract term. But here is the great thing about offering owner financed homes. You can play with the terms to make the deal work. Down payment, length of the loan, interest rate, it’s all in your power to play with to help you create a WIN-WIN deal.
Do you normally do deals with 10 year notes? What if that just does not make a certain deal worth it? Well, what do the numbers look like on a 20 year note, or with a small change in interest rate?
We usually try to sell our homes with a monthly price that is line with local rents in the area. If we have to massage the terms of the deal to get it there, we do. This allows us to get more deals, and be more aggressive with our offers in areas the market is strong.
Owner Financed Homes Help Create New Homeowners
It’s a good feeling helping someone achieve the American Dream, and you can do so by offering owner financed homes.
There are a lot of reasons someone might not be able to get a loan from the bank. Heck, entrepreneurs often have a hard time getting loans from banks because they choose to chase their dreams instead of doing the old nine to five. What we are looking for is a buyer with a good down payment, who we feel is deserving of the loan.
This is where your RLMO comes in. They qualify the buyer for you, and let you know if they have the ability to pay for the loan. They don’t approve or deny a buyer, that decision is ultimately left up to you. But, they do give you all of the information you need to make the correct decision.
Helping someone become a home owner on a 10 or 20 year note, that is what I call a WIN-WIN. Sure, it may not be their dream house, but it will allow them build equity and own their home sooner than later, while also helping you build long term wealth.