Bank vs Owner financing

Owner Financing Vs. bank financing: What you might not realize

Hey guys did you know that you can get a loan to purchase a property without needing cash or credit i’m gonna go ahead and roll the credits but i will be back to tell you how hey guys carrie from carrie buys houses and today we’re going to be talking about the difference between owner financing and bake financing and some of the things you might have not

Considered when taking a look at the two okay so when you don’t have any cash or credit um you can use owner financing to purchase properties when i first started out we didn’t have a lot of cash we didn’t have a lot of credit we couldn’t just go to a bank and get a loan right so we did a lot of deals with owner financing but guess what guys we have cash now and

We have credit and i still do tons of deals with owner financing and there is a reason why so let’s talk about that right now so all right bank financing so it’s interesting because i’m gonna go down here to my whiteboard here we’re gonna talk about bank financing first okay so bank financing i have a mortgage loan originator friend um who i was just speaking

To and it used to be that you could only get um four bank loans okay four bank investor loans right now so she goes no actually you can get like 10 bank loans right now and i’m like oh that’s great so after 10 what happens and she’s like you can’t get any more right it’s 10. i’m like so there’s a limit to how many you can still get and she’s like yeah but it’s 10.

Okay but you can only get 10 bank loans right you can only have 10 bank loans at any given time which means it doesn’t matter how much cash you have how much money you have how many assets you have you can still only get 10 bank loans and i don’t like to put limits right on how many houses i can invest in so if i can only get 10 bank loans i’m limiting myself to

10 houses right okay so that is one of the things to consider with bank financing another thing to consider with bank financing is your debt to income okay when you take out a loan with a bank it’s going to affect your debt to income ratio because it’s going to go on your credit okay if you have too much debt and not enough income coming in then you’re not going

To get 10 bank loans you might get one okay so it is going to affect your debt to income if you go car shopping if you take out a credit card they’re going to see all of these bank loans on your credit okay another thing to consider with bank financing is that there’s no negotiation really with the terms okay they’re gonna get they are gonna give you the terms

To their loan their bank financing right because they’re lending you the money they are running the show they are giving you the terms so you know they’re gonna they’re gonna ask for 20 down with so much interest in a 30 year whatever it is that their terms are that’s what they’re setting for you okay there’s really not going to be a lot of negotiation on your

Part that takes place you either accept it or you don’t get the loan okay bank financing is also going to require probably at least 30 days to purchase a new property okay so it’s going to take you maybe 30 days to get that bing financing because you have to go through appraisals right you have to go through inspections you have to go through underwriting okay so

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What do we offer to homeowners when we’re advertising our services as an investor well we advertise that we can close quickly so if we advertise that we can close quickly and we can close if within 10 days if that’s what’s needed can we go get a bank loan no i know of no bank out there financial institution bank that’s gonna give us a loan in less than 30 days

It’s just not going to happen okay so those are the things to consider with bank financing now let’s take a look at owner financing okay owner financing is an amazing tool okay that you can use to acquire properties and you can use owner financing with both short-term fix and flip or you can use it for long term where you’re holding them i’ve used them for both

Exit strategies okay so owner financing okay owner financing is limitless okay owner financing means that the previous owner has a house let’s say that’s free and clear and they’re going to finance it to you so they’re going to hold the mortgage on the note so you don’t have to go to the bank you’re giving the previous owner the payments now as the previous owner

Who’s now holding the note in the mortgage are they going to say um i’m sorry i i only give out um i only let you know i only do this with investors who have um you know less than 10 properties with loans now they don’t most of the time they don’t ask those kinds of questions they don’t care there’s no underwriting there’s no rules and regulations because this

Is a person this is not an institution so the amount of owner financing deals that we can do is limitless we’re not limited to just 10 loans right it’s limitless okay so the next thing to consider with owner financing is it’s typically not going to affect your debt to income right it’s not going to affect your debt to income so you could have 20 houses right you

Could own 20 houses all financed with owner financing and you go get a car loan and they don’t see any of that on your credit it’s not affecting your debt to income because it doesn’t typically go on your credit unless the owner asks for it to but i’ve never had an owner ask for it to go on to my credit right there’s going to be a recorded mortgage it’s going to

Be on my taxes but it’s not going to go into my credit so it’s not going to affect my debt to income oops i’m going to leave that there for you okay all right so that’s debt to income so owner financing it’s limitless compared to bank financing which is up to 10 right now okay owner financing is not going to affect your debt to income whereas a banks will okay

Let’s talk about the terms of owner financing the terms of owner financing are negotiable okay typically i’m giving them the terms right that’s my offer to the homeowner is here are the terms we can give you right so i’m setting the terms if i want this house long term i’m asking for a 30-year mortgage if i think i’m just gonna flip this house i might ask for

You know a five-year mortgage but i’m setting the terms right and there’s no the we can go back and forth with the homeowner but there’s no underwriter who’s saying nope you can’t do that nope it has to be this right so you’re going back and forth with the homeowner on the terms of the agreement and then finally with owner financing this is a quick close okay this

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Is a very quick close because there’s no appraiser okay you don’t have to do an inspection i still would especially if you’re new there’s no underwriters okay so there’s no hoops that we have to go through there’s no check boxes that we have to check right so we can close this in 10 days if they want to move on from this property we can close it very very quickly

All it is is a title search a lien search get the paperwork ready with the title company who should be able to do this deal and we close with the owner okay so we don’t have to wait 30 40 however many days it’s gonna take for all the underwriting and the appraisals and all that you know good stuff with the bank the banks now with okay you might be thinking well

Carrie bank financing is so cheap right now it’s not like i was just talking to my mortgage lender or my mortgage booker the other day it’s at like two and a half percent interest right like rates are crazy low shouldn’t i go get a bank loan sure you can go get a bank loan if that’s going to make sense but you have to consider that it’s going to affect your debt

To income right you have to consider that you you might not be able to go get a bunch of bank loans right now might just be one okay i’m not saying don’t go to a bank and get a bank loan within when rates are so low but if i have an option between doing a bank loan or owner financing i am always gonna choose owner financing even if i have to pay a higher interest

Rate right even if i have to pay a higher interest rate because again everything else is negotiable so take for instance one of the houses that we bought we bought for 200 000 okay that was the purchase price and this was a free and clear property that the owner owned he wanted to do owner financing with us so here are the terms that i gave him i gave him five

Percent interest and you might be thinking but that’s crazy why give them five percent interest you could have gone to a bank and gotten like two and a half percent well not on an investment loan i might be able to get like in the low threes right now just because of special circumstances in the world are allowing me to have that to happen but during this time

Interest rates were about four and a half percent for an investment loan and i gave him five percent i gave him more on this deal than i would get if i went to a bank but he only wanted like ten thousand dollars down okay with a bank i would have had to put like forty thousand dollars down he was wanting he he would do a thirty year fixed amateurized loan and

I think my monthly mortgage payment with him is like 750 right p-i-t-i it’s probably at you know 9.50 a month that’s my holding cost on this property and i can rent this property for um twelve thirteen hundred dollars a month so it’s a nice long-term rental but we actually converted it to a short-term rental and we’re making like three four thousand dollars a

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Month on it so this makes sense right because i can repeat this over and over and over again this is not affecting my debt to income this is not a bank loan where i’ve got you know only nine more left that i can use up i determined the term so i gave him a little bit more interest but i gave him less cash and i got a great 30-year fix and the payments worked for

Me long-term right and we were able to close quickly i think we closed this in three weeks and you guys one thing i forgot to point out between the difference between owner financing and bank financing is i did not have to qualify for this loan so remember we talk about um investing in real estate without cash and without credit and people think like how can i

Invest in real estate without credit right i need i need credit to get loans well you don’t need credit to get owner financing because i this is crazy you guys that this has never happened and i’m sure eventually it will but i have never had an owner ask me to do a credit score report for them which i would gladly do but typically i don’t get asked for a credit

Report so i don’t have to qualify for this loan i don’t have to show proof of income i don’t have to show anything i’m giving them an offer and they’re accepting and it’s done okay so i don’t have to qualify for it so if you know how to put these deals together and you don’t have credit and you don’t have cash it’s okay because most likely you’re not gonna need

To have the credit to qualify for this deal and even if you have to give the seller cash you can find someone to do this deal with you okay you can wholesale it or you can partner with someone because this kind of and that’s exactly what we did you guys actually i partnered with someone um they brought the cash we put the deal together we split it 50 50. because it

Was just a deal i just wanted to conserve our capital we were doing lots of other stuff i didn’t want to put ten thousand dollars down into a deal some of you think you know that might be crazy some might be like that’s brilliant for me in my certain life situation during that time i didn’t want to put ten thousand dollars of my own money into it but that’s okay

Because i’m making a few thousand dollars a month off of this and i have literally nothing into it okay so my return on investment is infinite i just put the deal together i made it happen brought someone in and now i don’t have any cash into the deal and i didn’t have to use my credit pretty cool right so difference between bank financing and owner financing so

Many things am i telling you not to go get bank financing no but what i am telling you is not to rely on bank financing always try to go owner financing if you can that’s it for today you guys if you have a house that you need to sell or you know of someone that has a house that they need to sell please contact us at the carry buys houses website all my information

Is there and if you have a house that you want to join venture on or you don’t know what to do with it please give me a call be happy to take a look at it for you and i will see you on the next video you

Transcribed from video
Bank vs Owner financing By The Investor Warrior