owner financingAs a real estate investor, at some point in your career you’ll be asked to consider owner financing.

Being the bank has its advantages and its drawbacks, but financing your real estate can be a great way to earn solid, steady returns as long as you go into the transaction with your financial eyes wide open.

Why Owner Finance?

Financing your own investment real estate for sale will widen your potential buyer pool.

Today, financing real estate from traditional sources is much more difficult compared to the past 10 years. That leaves a lot of potential buyers on the sidelines because they can’t get financing from their bank. With owner financing, you can market to a wider audience.

Those who need owner financing will also pay a premium both in the sales price of the home as well as the interest rate they pay each month.

Common interest rates for owner financed properties can start at 8.00 percent or more. Where else can you get a return on an investment today that safely yields 8.00 percent?

Immediate Equity

When financing real estate, not only does the interest rate fall in your favor, so too does the down payment.

Owner financed properties most often ask for a down payment from the buyer of at least 20 to 25 percent of the sales price of the property. That down payment is immediate cash in the bank to you in addition to the monthly interest charges.

While you may certainly entertain any offer, it’s important to get a solid amount from the buyer at the outset.

There are reasons buyers seek owner financing and that’s an inherent increase in risk; you can offset that risk by asking for and receiving a sizable down payment as part of your sales agreement.

Your Collateral

Finally, should your buyers default on your note, you can begin proceedings to foreclose on the property and recover not just the home itself but keep the down payment and interest payments made to you.

Owner financing provides opportunities to make more money on your properties and should you decide to hold onto a piece of real estate and provide the funds needed to a buyer, you might just find it a brand new, profitable opportunity.

Talk soon,

David Slabon