Who here has been the owner in a owner financed purchase? - Pirate4x4.Com : 4x4 and Off-Road Forum
 
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Old 01-09-2019, 09:56 AM   #1 (permalink)
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Who here has been the owner in a owner financed purchase?

Thinking of selling a property owner financed to make a little more in the long run. I know there's paperwork involved but not entirely sure what all is required. Property tax? Association dues? I know in a bank loan the new owner takes on these bills. How do you protect yourself from other lien holders getting in front of you in the repo line?

Where would I learn about this kinda stuff? If I can figure it out I wouldn't mind applying it selling a car or piece of equipment as well.
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Old 01-09-2019, 10:06 AM   #2 (permalink)
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I have not been an owner but I did buy a house with owner financing. It all went well. I had a good friend in the real estate business give me some advice that I will pass on to you. Make sure it's written as a mortgage and not a loan, that way you have the same protection as a bank, OTH so does the buyer. We settled on a 14 year term at 1% above prime at the time. After about 6 years I financed through a bank and paid him off. We never missed a payment or had any excuses, we were very thankful at the time that the owner actually suggested it and wanted it. We made the payments to his mom who apparently was living off the money as he wanted her to, he was actually upset that we paid it off early. We just moved to a normal mortgage at a bank with a much lower rate.
I guess the word of the day would be to use extreme caution and require a substantial down payment and do a background check if that's legal along with a credit check.

ETA: we assumed all tax/insurance and maintenance liability on it once we had the closing, it was ours.

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Old 01-09-2019, 10:17 AM   #3 (permalink)
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Originally Posted by Seabass View Post
"to make a little more in the long run."
(Optional) Make a LOT of money in the long run.

It wasn't me, but keep this scenario in mind when drawing up the papers.

There was a family that ran a bar in the small town next to me when I was a kid. They got tired of running it and sold it "owner hold mortgage". The new owners ran it for a couple years until they couldn't make money or ran out of it. When the new owners defaulted on the loan/mortgage the original owners got the bar back. They repeated the process over and over with new owners every couple years and made more money selling that place than they ever made by running it.

Figure it out.

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Old 01-09-2019, 10:27 AM   #4 (permalink)
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I bought my business owner financed 2.5 years ago. He had a title company set it all up. I make my payment to the title company including escrow for taxes and ins and title co cuts him a check every month. There are fees but i think they are minimal. There is also a clause in the contract that states i have to pay 7 years interest to protect owner from getting dicked on a refi.
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Old 01-09-2019, 10:31 AM   #5 (permalink)
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(Optional) Make a LOT of money in the long run.

It wasn't me, but keep this scenario in mind when drawing up the papers.

There was a family that ran a bar in the small town next to me when I was a kid. They got tired of running it and sold it "owner hold mortgage". The new owners ran it for a couple years until they couldn't make money or ran out of it. When the new owners defaulted on the loan/mortgage the original owners got the bar back. They repeated the process over and over with new owners every couple years and made more money selling that place than they ever made by running it.

Figure it out.

.
My aunt and uncle did this exact same thing with a small bar / restaurant. Made out like bandits for years until a couple finally came through. And everybody knows they too made more money while selling than ever running it.

This can be a "sucker" approach especially if the property has hidden skeletons in the basement (so to say). Every 2 years when the lease-ers figure it out, they jump and run. I looked into the bar my aunt and uncle had once and found the septic was way under par, the property was under par, the buildings were built too close together to be able to expand the bar without asking for an exception from the town (which would be slim to none) and the amount of money supposedly coming in never matched the tax records anywhere close. And most likely a lot of that was from sweeping the money under the table. Very hard to account for every beer and all the food when a lot of the beer is promotional.
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Old 01-09-2019, 11:15 AM   #6 (permalink)
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IIRC some states have legal protections and requirements for owner financing situations, especially CA.
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Old 01-09-2019, 11:19 AM   #7 (permalink)
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IIRC some states have legal protections and requirements for owner financing situations, especially CA.

This property is in Ca in a 55 and over community. I bought it for my mom when she started to lose her shit. I don't want the liability of renting it and this could be a great angle for more dough
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Old 01-09-2019, 11:21 AM   #8 (permalink)
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My grandpa owner financed a house in Iowa when they inherited a house in Tampa and moved there for a few years. Decided to move back and with the proceeds from the Tampa house bought their last home in the same town where his owner financed house was (as well as his kids and grand kids). Guy took almost TWENTY years to finally get a loan of his own on it. Grandpa rewrote new paperwork every 10 years and the guy never missed a beat. Grandpa made out REAL well on that place since it was paid for before he originally financed it.

I could see it being really risky, but this instance certainly paid off.
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Old 01-09-2019, 11:33 AM   #9 (permalink)
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Since the property is in CA, who the fuck knows. In other reasonable states a lien holder is protected by the timely recording of the mortgage/deed of trust/lien. The priority of your lien will typically depend on the date the lien is recorded/order other liens are recorded. Junior lien holders may still foreclose, but they do not extinguish any superior liens. The foreclosure of a superior lien, however, will extinguish any junior liens, but any excess foreclosure proceeds, if any, will flow down to the junior lien holders in order of priority.
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Old 01-09-2019, 04:09 PM   #10 (permalink)
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When I purchased my grandfathers house in California he held the mortgage. We went through "National Family Mortgage" to write up the loan docs. Unfortunately, we didn't do everything exactly right and when I refinanced it away from him we had to go through the refinance as if it was an original purchase.

If I were to do it again, I would go the same route, however, I would use a Title and/or Escrow company to make sure everything is honkey-dory.

Also, the IRS requires that you charge at least a minimum interest rate on the "loan" if you the new "owners" want to deduct the interest.

Joel.
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Old 01-09-2019, 04:20 PM   #11 (permalink)
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I could recommend an agent that does a lot of owner finances properties in my area. However she isnt cheap
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