Share your experience on creative financing?

[LillianHo]

I am very interested in creative financing with the seller. I know somebody who is very successful doing it. Have you done any deal with creative financing like owner financing 10-20%, no interest for 5 years, option to buy in 5-10 years or owner finance all the purchase? How would you approach the seller with these terms? I would really appreciate your advice.

Lillian

 

[ScottL]

QUOTE (rena98 @ Jun 17 2009, 11:27 AM) I am very interested in creative financing with the seller. I know somebody who is very successful doing it. Have you done any deal with creative financing like owner financing 10-20%, no interest for 5 years, option to buy in 5-10 years or owner finance all the purchase? How would you approach the seller with these terms? I would really appreciate your advice.

Lillian


Hi,

I bought a townhouse in Terwillegar, Edmonton a few years back.

I leased the townhouse with the option to purchase.
I made a 3% downpayment.
I then rented the home to a tenant, and made $200/month positive cashflow.
After the year was over, I placed a mortgage on the property. Because the value had increased substantially, I did not actually have to put a downpayment on the property, because the new mortgage (at 85% of the value), was the same as the pre-secured purchase price.
I held onto the townhome for another year, again gaining positive cashflow. At the end of the second year I sold the townhome for a $20,000 profit.

It was rather effortless, and I made a $25,000 gross profit.

This is one example of a lease with the option to purchase. In this case, I knew the seller. He had tried to sell on mls for 90 days and wanted to just secure his mortgage payment. I have other cases (not quite as profitable but still positive), where I found the seller by placing ad`s in the newspaper or bandit signs that I would buy your home.

Good luck.

Scott

 

[mpillajo]

Hello All,

I`m in need of generating $30000 for a deposit on a property...I co-own two properties and thought about pulling out some equity from one of them (there is a little room) to do this, but the lender, legal and appraisals fees seem excessive. Any thoughts on any other way to drum up $30,000 fast?

Maritza

 

[Thomas Beyer]

QUOTE (rena98 @ Jun 17 2009, 12:27 PM) .. Have you done any deal with creative financing like owner financing 10-20%, no interest for 5 years, option to buy in 5-10 years or owner finance all the purchase? ...

yes, we have done many of those .. it is a mandatory skill set for real estate investors !

QUOTE (rena98 @ Jun 17 2009, 12:27 PM) .. How would you approach the seller with these terms?
you write an offer .. or 2 .. and be prepared to hear many "no way" ..

 

[LillianHo]

Thank you Scott and Thomas.
Yes Thomas, you are so right, I heard so many "no way". I guess I have to keep trying ( make offers) and not get discouraged by Nos.
Do you find easier to talk about owner finance with the sellers? Is it possible with the realtors involved?

Lillian

 

[RedlineBrett]

It really depends on the market segment you are trying to do business in.

medium to large multi family buildings (5plex and up) well you know that the owner is also an investor and will have at least a moderate familiarity with private money or owner carried financing. Much much more common to do creative financing in this world.

small residential (apartments to fourplexes) are much more difficult to push deals through. Your typical owner is NOT an investor and wants a clean deal to move on. Their realtor won`t know anything about it and it can be very difficult to talk them out of an all-cash deal. You will also have to know your end of things very well and have quick and easy answers to all the `what if` questions as you will be facing an up-hill battle the whole way.

Not to say that you can`t do a creative deal on a smaller place but in my experience it is only worth the time and effort if the seller is advertising creative financing in their listing.

Creative financing appeals to many and helps to sell books - "make money with no money down!" - but in the real world it just doesn`t work like this very often.

QUOTE (rena98 @ Jul 5 2009, 11:09 PM) Thank you Scott and Thomas.
Yes Thomas, you are so right, I heard so many "no way". I guess I have to keep trying ( make offers) and not get discouraged by Nos.
Do you find easier to talk about owner finance with the sellers? Is it possible with the realtors involved?

Lillian