Owner Finance

I have a couple of potential deals I’d like to set up using owner financing but I have no experience in how to make this happen. I’ve searched for topics covering this but I still don’t have a clear understanding. I’ll give an example of one of deals:

Asking price of 20K, I’d like to give them $275 a month for 5 years totaling 16,500.

So my questions are should I have an attorney draw up the papers? Do we go through a normal closing? Is there any potential downfalls for me or the buyers other than me defaulting?



You can have an attorney draft the paperwork. It might be a good idea to do title search at least though. No draw backs if your numbers add up. make sure to account for insurance and taxes to see if you will cash flow.

I could still get title insurance like I would if I were getting bank financing correct?

The house would rent for $550 so I’m basically breaking even if I figure expenses to be 50%. I’m fine with that given the fact that it’s a good buy, there’s little money out of pocket, and it’ll be paid for in five years.


I’ve done seller financing and it’s easy. Your Realtor will have a purchase agreement, or you can just print out a purchase agreement. Then at closing the Title Company will have you sign all the docs you need. The closing will be the same EXCEPT you will close in 1 week instead of 3-5 weeks. The stress level is MUCH lower.


  1. The biggest risk is that the seller does not pay their mortgage after you pay them. There are two main ways used to offset this risk.
    -You can set up a direct deposit with their lender so you know that the mortgage is getting paid. Will need to check with the lender to make sure they allow this.
    -You can have a third party take your check and then pay the seller’s mortgage.

I’ve done exactly what you’re doing, and it worked great. I bought a really great deal and used seller financing. We financed the property over 5 years at 8%. Every month almost all of my pmt goes to principal. I also like the fact it will be paid off in 5 years. My closing costs were only $220 instead of 3% of the purchase. The Title Company will give you amortization schedule so you can see every pmt and how much goes to principal and what you still owe every month.

What is the purhase price?

Anything that gets paid in 5 years and is a good deal (not in war zone) is more than a good deal :slight_smile:

Sounds like a good deal, but lower the purchase price and it’ll be a great deal!

It will be a great deal even if you pay the asking price of 20K. Providing there aren’t more then a few thousand in repairs. The nice part about properties this low is that no one can get financing. The seller either has to seller finance or find a buyer with 20K cash. I’ve seen good deals like this sit on the mkt for a while due to buyers not being able to get financing. If anyone is looking for seller financing, under 50k properties and especially under 30K properties are perfect candidates.

Low priced properties (particularly SFH) that can be paid off quickly is exactly how I do business today. I hate putting properties on 30 year mortgages.

Let us know what the purchase price ends up being…

The property is in really good condition and from the looks of it only needs minor repairs, paint, and carpet. It’s not in the greatest neighborhood but the rental market is strong and I’m would only be paying .50 cents on the dollar at full asking price. So regardless to me this is a great deal.

The current owners own the property free and clear so I don’t have to worry about them paying a mortgage. They’ve already moved to their retirement home out of state so they should be well motivated by now.

I’ll keep you guys posted on the progress of this deal and hopefully they agree to finance the property.

cakeaholic, once you buy house under owner finance agreement, can you use this collaterall to make other deals? or used as collateral to buy more properties???

others with some knowledge please respond too thanks.

Yes, you own the property. You have the deed and your mortgage is privately held. So technically you can use as collateral. But your not talking about much equity to be working with here.