How To Provide Buyers with Owner Financing

Since the sub-prime mortgages are drying up, how can we assist these buyers to purchase homes? I see quite a few people that have proplem credit but want to rent-to-own.

Could we get houses under contract at discount and sell to investors.
Then either set-up the investors with L/O or land contract T/B’ers to provide the T/B’ers with owner financing and we get in on part of the deal

  • OR-

we L/O from the investor and the investor gets passive income and hassle free investing.

  1. Would this strategy seem profitable ?
  2. How would we advertise to get the investor?
  3. Would these strategies be doable with little cash reserves ?

The best thing I’ve found is gift them the 3% downpayment for a FHA. I thought carrying back a 2nd would be better, but there are very few programs that allow it.

Thanks for your response. Is there a way get house under contract then advertise and sell to an investor. Then maybe set up a L/O deal with a T/B for the investor while being part of the deal.

The easiest way to do what I think you’re thinking, is to have the investor buy the house conventionally and lease/option it to you and then you sub-lease/option (Sandwich) it to your T/B.

(Side note: This is MUCH cleaner than the “old” way that I started off with by setting up a joint venture with co-ownership.)

This is a great way to bring silent partners in who want a hands-off investment. You find the deals, you fill the houses, and you do the ongoing management. They provide the credit and down payment, and they cover any vacancies or repairs.

The best place to look for these investors (I call them “credit partners”) is mortgage brokers. Like with anything most mortgage brokers won’t be able to help, but some have a lot of investors like this. It’s a great deal for them because they can place a lot of loans through a relationship with you.

I haven’t done a deal like this in a few years but I’m still getting the occasional email or call from mortgage brokers with investors.

Thanks marcus335 and Doug.

So marcus335, I guess you are referring to the down payment assistance programs such as Neighborhood Gold and Nehemiah Program to assist the buyer with down payment and closing costs.
The way I understand it, a buyer can be able to purchase with 100% financing.

Doug, I like your strategy.

  • Investor buys conventionally
  • They provide the down payment and credit
  • L/O to you and you L/O to your T/B
  • You find the deals and fill the houses
  • Silent partner/investor gets passive income, depreciation and
    hands off investment

You mentioned the investor covers the vacancies and repairs. How does this usually go over with the investor?

How are the profits split from the LO deal with investor ( option fee, monthly cashflow and profit when sold to T/B) ?

It’s just part of the deal. If they don’t like it then they’re not the investor you want. BTW those unexpected costs come out of the profit BEFORE the split, so it’s not like they’re the only one to lose. The longer you sit on your hands and don’t move the house the less money you make too.

I split all three 50/50. I think that’s fair since neither of us could do what we were doing without the other.

If any investor goes for this deal, they are not a real investor. All you have to do is buy the property on a wrap or sub-2 and then assign it to an investor for a fee or resell it to your buyer with poor credit on a wrap. You make you cash eiher way.