Owner Financing

I am buying a SFH from a traditional lender, occupied by a renter. I want to owner finance sell to the tenant. Do I need to pay off the primary lender BEFORE I can do this, or can I set this up on a private contract with the tenant and continue to pay my lender as I go?

No…you do not need to pay off the lender first before you do owner financing with your tenant.


I’ve done this. I bought a property using seller financing, even though the seller had a loan on the property. The seller can even refinance (allowed in our contract), but not for more than the amount I owe her.

Dear Iron,
Your answer contradicts Investar, but then you have 3 houses and many more posts AND indicate you have done it. Is this a hush-hush backroom deal, in other words not notifying the lender, or what? Can you walk me through the structure of it? I presume you must do all the usual things such as title search, etc. Do you know a good blog where I can educate myself on this? Thanks a bunch.

We don’t contradict each other, we totally agree. I was the one buying through seller financing, where as you are the one offering seller financing. Let me walk you through an example.

Property $50,000

  1. You buy from a seller for $50,000
  2. Then you sell using seller financing for $80,000 (5% down min.)
  3. Then you can (if allowed in your contract) refinance for up to whatever the tenant (buyer) owes you. So you buy it for $50,000, sell it for $80,000. If you want you can refinance the loan you have with the lender for an amount not greater then the tenant owes you.

The reason you may want to refy is because you may find someone that can give you a lower interest rate, or you need a little money for something. You just can’t refy with your lender for more then the tenant owes you.

Thanks Iron,
Here’s my concrete situation:

SFH worth $$95,000
I’m buying from lender, I owe $102,500
I want to sell to a buyer for $95K, but don’t have the $7,500 to pay off lender
Can I owner finance my SFH to buyer, all the while maintaining my lending contract with my lender, and just keep on paying lender while collecting from my buyer.

If I can do this, HOW do I do it? It’s in SC. What do I use for forms, do I use a title company/atty, or what?

Sorry to be a pest. much apprciated.

Those who only invest in their own backyard are amateur investors who are unlikely to do really well over the long term.


For someone who makes big statements, YOU SEEM TO BE THE AMATEUR. It appears that you don’t even know how to put together a simple deal!


You can’t owe more then the person you are selling it to owes. Are you doing this for a relative or something? Why are you buying and selling for a loss?

  1. You buy it. Close using a Title Company
  2. You sell it using a purchase agreement
  3. You will want at least 5% down, have a Title Company pull a credit report, verify income by calling employers, and get a couple of personal references.
  4. Then you call a Title Company and they will take care of the rest.

You can close in a week. The down pmt will be given to the Title Company at the closing table. The devil/money is always in the details so ask plenty of questions if you have them. There is nothing odd about what you’re doing, except the fact that you’re losing money on the deal.

Dear Iron,
You are a gracious and helpful person. Thank you.

Dear Property Manager - you are most ungracious and rude. I’m selling this for a loss because this is one of the properties I lost my shirt on by buying without flying there first. I made the mistake of trusting someone. I’ve never done an owner carry, so pardon me for not having all the answers as you seem to. For a moderator, you ought to learn to practice more kindness.

Dear Property Manager - you are most ungracious and rude. I'm selling this for a loss because this is one of the properties I lost my shirt on by buying without flying there first. I made the mistake of trusting someone.

So let me get this straight. You’ve lost your shirt doing long distance rentals; don’t know how to put together a simple deal; you have the audacity to lecture the forum about how we’re amateurs if we don’t follow in your footsteps and lose our shirt on long distance rentals; and I’m rude! No wonder you won the award for the dumbest post ever written!

If you ever hope to be successful, maybe a little less typing and a little more reading would be in order!


This is really dependent on where you are. In Texas the laws are such that nobody will owner finance to a tenenat. You will actually have to give the tenant the deed to the property thus causing you to have to forclose if the tenant does not pay.

What I do is owner fianance using a land trust. The lender is not a party in this transaction.