Seller Financing – Enjoying a Comeback?
The real estate market in the Boise area is HOT right now. Cash buyers rule as houses get bid up, sometimes as much as 15%! So with such high demand on property why would a seller consider owner financing? But perhaps we should first look at why a buyer, (investor), would seek owner financing outside of conventional borrowing. Some investors building a rental portfolio run into poor debt-to-income ratio and just can’t find a bank, or other lender that will take their capital assets into consideration in order to qualify. Another stumbling block can be that the property doesn’t qualify for traditional lending. Private money lenders are asking 10% – 12% and usually prefer a short term loan of under 2 years. So that leaves the investor stuck. But maybe not – owner financing could be the solution they are looking for. In many cases, sellers want to be cashed out, but not always. If the seller doesn’t need the cash to reinvest in real estate or a luxury item, but instead is looking to transfer assets to equities, an annuity or other form of passive income generating vehicle, they may come to appreciate that they already own that vehicle, and would be open to holding the note on the sale of their property. Seller finance benefits can include potential for a higher sales price; less closing costs; a quick sale; possibly eliminate appraisal influence; and even potentially eliminate formal inspections for deficiencies. All these points are attractive, however probably the greatest consideration is the potential for a higher return on equity. From the buyers perspective seller financing is attractive for many reasons. Of course probably the greatest reason to seek owner financing, as mentioned earlier in this article, is to get easier credit than required to qualify conventionally. Additionally, other benefits could include a lower down payment requirement, or series of balloon payments; less hassle in providing financial information; more privacy when disclosing financial information; a quicker closing, and modifications to the loan can be simple renegotiations with the owner rather than being limited to bank conformities. There are a few downsides to buying with owner financing, but very few, and probably none that would concern a seasoned investor. An owner financed sale is not going to provide credit reporting, this would only be important to someone who is wanting to establish credit. There would be no reserve accounting provided to handle property tax payments and insurance. However, an escrow could be set up with an independent escrow company like Idaho Escrow for a nominal fee, it this was a concern. You may be paying higher than market value if you are not familiar with local property values, and if you don’t have a home inspection performed, you could be buying a property with undisclosed deficiencies. The greatest obstacle to an owner financed real estate purchase is finding a property that you like and that has an owner open and able to carry the paper. This really requires familiarity with the area, word of mouth, and even some door knocking.
Pre-Scheduled Optional Services Schedule:
In March we had roof inspections and spring clean up scheduled. Due to high demand in the new-build segment of our real estate market, the roofer is a little behind schedule. We have a commitment for completion by the end of April.
Yard spring clean up continues into early April, with an anticipated completion date of April 11th.
Scheduled for APRIL
Contining Yard Spring Clean up
Summer services will include: Dryer Vent cleaning, Power Washing, Crawl Space and Attic inspections.
Fall services will include: Gutter cleaning, fall landscape clean-up, fall lawn care, hot water heater service.
If you wish to elect to have one of more of these services for your property, and have not already submitted the Optional Services Survey form, please contact Spencer Henderson: firstname.lastname@example.org
There are no special accounting events happening in March.
If you ever have questions about your statement, please contact Karen@rentalsinboise.com.
Our April Tenant Newsletter revisits the issue of pet waste. Lawn maintenance crews are just starting to get out for their first mow of the year. Tenants are being reminded to pick up their pet waste so that our crews don’t get sprinkled with anything more than grass. As a further reminder of the polluting effects of pet wast I am also republishing an article I wrote in March of last year, “The Shocking Scoop On Dog Poop!”
Our business feature is on a recently opened coffee roaster and esspresso shop, Push and Pour. Located in Garden City close to the green belt. This unique artisnal coffee shop is offering our tenants one free cup of french press coffee during the month of April.
What Are You Interested In?
This newsletter is intended as a resource and communication platform for you. If there is a topic, relevant to the management of your investment property, that you would like me to write on, please let me know!