When you SELL on an owner finance do you amortize over 30 years or 15…somewhere in between??? I also want to put a balloon on the note so I can finally cash out…any suggestions.
What’s the best way?
I’ve rehabbed this property, had a contract (I was selling it myself) a week from closing and the guy just vanished.
I haven’t listed it with a realtor because I want to be able to sell it owner finance if it’s not moving quick enough.
I’m trying to get the best for myself even if I have to hold it for a couple of years.
I am in Texas also. When I owner finance you have to put the deed into a trust, and the terms of that trust give me and the tenant interest in that trust. I have what they call a beneficial interest and the tenant does not derive benefit from the trust (just like a country club membership). I make the life of the trust 24 months, with the understanding that at the end of that 24 months, the tenant will go to a bank, refinance giving me the money thus dissolving the trust, and giving me the cash. If at the end of that 24 months, they have not cleaned up their credit enough, we do another trust, with enhanced payments and price to dissolve the next trust. I then give the non-benefit trustee, a permission to occupy (which reads just like a lease) When the person doesn’t pay, you actually can evict, instead of foreclose (the difference between 4 weeks and 6 months to get them out).
I am not a lawyer but I know one. That is to say, don’t do this yourself. Don’t get your friendly neighborhood real estate lawyer to do this either. Get a lawyer that is board certified in real estate in the state of Texas. I say this because the Texas State legislation hates this concept. They made it defacto illegal to do contract for deed, we got around that by doing lease options, and they went back in and made that defacto illegal, and we now are doing owner financing. In order to make sure it is legal, you have to use a lawyer that knows what he is doing.
I don’t do owner finance unless the tenant meets my requirements. These requirements are that they either have good credit or bad credit on the mend. In other words he had a problem and is getting better, but can’t qualify for a mortgage yet. He also must give me a down payment. If the house rents for $1000/month and he has $3000, I tell him that is not enough, he may as well rent it (when they rent I get first months rent and deposit $1000) That is not worth my time to do owner finance (the fees to set up the trust will cost more than that other $1000 so I get nothing out of setting it up). They have to have at least $5000 before I will do it. He also must understand and is capable of doing his own maintenance.