I have two properties that I’m thinking of selling via owner financing. I’d like to provide the financing with a stipulation the loan will be paid off/refinanced within 2 yrs. I’ve never done an owner finance before, and will likely seek the legal advice of a competent attorney first, however, I’d like to know how others are doing it. Particularly, how do you arrive at a good set of options for the buyer? IOW, I’d like to provide options based on the buyer’s down payment, but not sure what is good vs. what is too far in left field. For example, if I’m selling a $140,000 home and the buyer is willing to put down $10,000, what type of interest rate seems reasonable? 9%? 10%? 14%? What if they can only put down $5,000, or what if they can put down $20,000?
One think I’d like to be able to accomplish is to put some cash in my pocket right away (i.e., closing costs + holding costs - down payment > $0), and have positive cashflow for the 24 months. Therefore, a $5,000 down payment would probably be the lowest I could go (IOW, no $0 down deal).
Also, what happens if buyer fails to pay off the loan in 24 months? Are clauses in the contract such as additional penalties for not closing adequate? Or should I just start the foreclosure process (which, BTW, in Texas is only 21 days)?
I’m just trying to get a feel as to how others who’ve done owner financing successfully do it.
Thanks!