Should I Owner Finance to my Tenants?

Sneak Peek of our Nov 2016 “Transaction Review & Calculator Practice” mastermind session.

Believe that we’re already in november and it’s you know the speed way down to thanksgiving and christmas in new year’s and all that but you know it’s been a great mare really glad to have you guys here with me the ones that are here live awesome looking forward to connecting with you as we go through a couple of these examples and for those of you are listening

On replay i always love to have your participation too and so this is our monthly mastermind where we go over deals so the standard disclaimer this is just my opinion only for educational and entertainment purposes only i always consult do your own due diligence and you know consult your own professionals so i thought you know once in a while something comes up

Right very spontaneously and this was a phone call slash email that i got from a gal you can see she wrote me i guess that was two days ago on her finance dilemma she got me on the phone and then followed up with this email and i thought it would be great for us to work over together and see what you guys think she’s looking for solutions she says hi don thank

You for speaking with me earlier today per our conversation we relocated out of state from a home in kansas city missouri that we mortgaged for one hundred and five thousand at five and a half percent 30-year fixed so they bought this home thinking that they were settling in and then they got a job transfer there are approximately twenty two years left on our fha

Mortgage acquaintances from church had an interest in renting our home for nine hundred a month and moved in when we left in 2012 they have lived there since that time and are now interested in purchasing our home from us utilizing owner financing they have no money for a down payment and do not feel that they could obtain a mortgage on their own they let their

Previous house go back to the bank so they have no credit except for a few instances they have consistently paid their rent when do over the course of their occupancy we are excited that they want to purchase the house as we are not making anything on it basically it’s barely covering itself there’s no positive on it but they don’t have to go negative either so far

Right it’s not some big maintenance bill comes through and let’s see we’re not making and i’ve had to continue maintenance and repairs but on top of having no down payment they are asking us to reduce the monthly payment from 900 down to 600 so that they can afford any issues that arise so just without going any further comments questions so this is a nice church

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Friend who has no money that has been paying 900 rent now they want to own it for zero down and drop the the pni down to 600 any comments yeah you are so funny you know there’s such thing as like reputation equity or character equity but i think this is just taking it a little too far i mean i think there you know it’s probably probably got in without any security

Deposit on top of that is my guess but you know if if yeah so they’ve been paying 900 rent they’re barely making it now they’re gonna have to go negative three hundred dollars to let these people own it does that it all make sense to anyone on the call no no so i just said you know for one thing no and for the second thing no and third no anyhow well just because

It’s like it’s one thing if they want to do a favor for someone but you know it’s not there it’s not exactly like hey we’re gonna hook these people up and take a loss nick a loss on our end to benefit them some people want to do that but this wasn’t her situation she just thought how do we sure want to be done paying for our maintenance on this thing they don’t

Like those surprised you know repair bills which i totally get so she’s kind of at the desperate stage where she’s like anything can you please get me out yeah so can you please just get me out and they’re there so she’s going is this something i should do they were hoping i would say yes so anyway we put a lot of money into repairs and updates but it’s not you know

The greatest of neighborhoods we were naive okay dumb but here we are to sell the home today we’d probably only bring in seventy thousand not including agent fees we still owe eighty two thousand so they bought it for probably 110 or 115 and they have a 105 blonds they have paid it down to 82 thousand but it’s only worth 70 thousand now not including closing costs

So then they now they live out of state and they’re very tempted by the easy route but we have lost so much money on this property that we want to get out without going deeper is there a way out should we find an ounce and out payment for them we are truly looking for answers so um let me just pull up a calculator just because this is called calculator practice so

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But anyway can you know what would you do i would tell him to do a short sale cooperate do a short stay you’re gonna get hit a little bit because you’re underwater but the bank might only lose fifteen or twenty thousand you’re gonna get hit a little bit but if you cooperate a short sales a lot better than foreclosure and you’ve gone with your life don’t don’t give

Him any more money you know nothing’s gonna be out of your pocket a short sale is gonna just happen at some point and so i’m just gonna you know pick up a little bit better piece of property for a little bit less than what that’s worth which is okay on the short sale and life goes on and don’t keep on financing a church friend so to speak and get yourself in more

Problems yeah i mean to me this is just if they had a down payment we’re it’s different right but really why give up you know it’s already bearing negative for him you can see i plugged in this their original loan just to see what their pni principal and interest is so p v is 105 here i put in the interest rate 360s that’s 30 years and then it’s fully advertising

So there’s not no balloon the future value is zero we calculate for the payment it’s almost six hundred and then they have taxes insurance on top of that so if they’re getting you know what what’s average taxes and insurance like 125 bucks do you think yeah some of that area there too and you have to understand to tom that if somebody anywhere in the united states

It doesn’t matter where if they cannot afford or only afford $600 a month for one house or a complete house something is not right in that family they’re not doing something right that is like is dirt cheap as you can get they’re having trouble doing that i want to go from 900 600 that’s a red flag as well that’s just that’s just dirt cheap right right and and i

Don’t blame them for asking you never know until you ask right it’s not there’s nothing wrong with them asking no no i’m sure they don’t understand the underlying financing probably at all right they’re just going hey they move out of state they’re they don’t want to pay for anything let’s see what kind of deal we can work hey there’s nothing wrong with that no

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You know so but yeah if i’m really assuming they can afford more that they’re just trying to you know but you can see if piti is 721 and she gets in 900 months a month in rent she has 178 big fat cushion for when the water heater goes out or you know those things need to be repaired you know heaven forbid something i guess they did a lot of updating so that there’s

Not a lot of repairs at this point but you know at some point there will be so basically it’s just barely barely squeaking by you know and if she’s only getting in 600 a month she still it still washes but but the no down payments a problem because if they decide they can’t afford even 600 a month and they default now she’s got to pay legal fees to get them out

And they can you know drag that out i don’t actually know how long someone can drag out a kansas city foreclosure anyone have intimate knowledge of that no i don’t know if it’s for judicial or non-traditional i think it’s uh it’s nine is nine so there should be no within a six month period that sound right to you kyoka about six months yes so they i don’t you know

The time fine but i know that is not judicial in it takes less than a year yeah so non judicial can go anywhere from i think texas and 45 days to son yeah you’re a year but with an average like california i think it can take us six months really realistically more like seven or eight to get someone fully yeah i think california is at the height even though it’s

Ninth edition we still at the height takes longer than most so anyway no so now they have more potential headaches down the road instead of easing their risk they’re adding to it in my opinion because this family is trying to get too good of a deal and which means to me if they have no down payment then they’re not used to saving money on a monthly basis and when

You own a property you know there’s these things that come up so you have to have some you know excess reserves that you can call on when you need it or or else what will happen is they’ll say hey you know we had to fix something at the house can we skip this month’s mortgage payment you

Transcribed from video
Should I Owner Finance to my Tenants? By Dawn Rickabaugh