Owner Financing Advice

[jimnjana]

We've made a decision to sell one of our vacation rentals. Its a lakefront property with a double wide trailer. Since it is not a stick built home, we know potential buyers will have difficulty getting a conventional loan. We intend to offer owner financing. Any advice from anyone who went down this path before?

 

[Brat]

We did years ago, a resort condo. Have the contract written by your lawyer. Look at the sale in the same way a conventional lender would, require a substantial down payment, fees for late payment, and something concrete that defines when the buyer is in default. In the loan include a statement that this is not their residence and should the buyer go in default you are entitled to possession (foreclosure to clear the title). Do a credit check as well.


Our buyer was a builder and his wife. His business went belly-up so they defaulted on the loan several years later, we foreclosed. We rented it for another couple years, then sold at a substantial profit - again

 

[JOHNNIE36]

We have one going right now. Our buyers rented it for 6 months before they decided it was right for them and made an offer to purchase. We had been realtors so we knew what to look for and we had already qualified them for the rental. When they purchased they told us they wanted to pay it off in 10 years as that's when they were going to retire. We drew up the sales agreement ourselves but had the closing at our attorneys office just to make it more official. We do the amortization schedules and send them a copy of the payments at the end of the year for IRS purposes. We pay the license fees every year, send them the decals (one for each half of the double wide) and the buyers reimburse us. They handle all the lot fees and other expenses. We also have them carry us on their home owners insurance policy as first mortgage and we get notice of this every year. They cannot resell without our approval. The only thing in limbo is how to handle the title transfers when the home is paid off and we deliver clear title. The limbo part is the state tax that will be due and on what price. We sold it for $125K and they still owe us $100K. Eight years to go so I'll worry about it then.

Mortgages are hard to get on those type homes and us carrying the mortgage was the big selling plus. Great income for us.