...financing may be even more important then the house or real estate investment itself. In the current real estate market one of the difficulties of reducing
the huge inventory is access to financing. If you consider it
carefully, financing may be even more important then the house or real
estate investment itself. It is the accessibility to financing that
allowed so many people to purchase homes and speculators as well as
investors to acquire real estate. It is financing that is part
of the cause of the current slow down in the market. It is also
financing that makes real estate investing so much better in general
then stocks; that being leverage. There are many options for
financing a home either through a bank/broker or short term money through a hard money loan and the less common, through
the seller. Seller financing is an option, more so in the current
market. When money was easy anyone could have received very low
interest financing from a traditional bank. Though this is still true
it's much harder. Banks have tightened guidelines and there is just not
that much money floating around. Scarcity increases cost. For sellers
in a position of large equity seller financing may be an option either
to sell a property or to create cash flow secured by real estate
without the maintenance and risk of owning real estate.
Some reasons seller financing may be an option for real estate owners.
Seller financing can be used as additional leverage for selling your property.
Sellers can carry the note to generate cash flow secured by real estate
and its cash flow that makes people financially secure. It can give you
an edge over other competing properties.
Because you hold the note, you be as flexible or accommodating to a buyer as you choose.
If you're selling an income property such as a multifamily property or
even land with a large equity position, by holding the note you deffer
capital gains.
The note holder can also sell the note.
Just as lenders sell notes, a seller can do so. There are
requirements that need to be met so look into what a note buyer will
want before you create the note. It can be sold at any time. Some
will even buy a portion of the note.
Buyers can benefit from buying real estate with seller financing.
As a buyer or investor your
options are greater if you are willing to purchase a property where the
seller holds the note. Often it can allow you to buy a property which
you normally would not be able to buy. Your down-payment may be lower
as well.
The closing costs associated with traditional lender are quite high.
With seller financing you avoid many of the associated costs of getting
a loan. That money can be put toward the down-payment, saved or secured
for making payments.
You do build credit, and because you're dealing with a private party you
may get additional flexibility which you would not otherwise.
There are more properties that have seller financing in this point of
the real estate cycle. Sometimes you'd be surprised what you can buy
with out having to get a traditional mortgage and not having to get hard
money.
Currently we have a magnificent home in North East Phoenix, a beautiful
remodelled home on a large lot with wonderful finishes and even a view
that is available with seller financing with a 20% down-payment. Take
a look at the home here. www.22place.com Can you combine seller financing with traditional financing? Yes, in theory and in practice but in this current real estate market where lenders are more risk averse you are unlikely to obtain regular financing with a second mortgage held by the owner. We have tried this several times with no luck. Things change often so while this week its not doable, it may be next week, but its unlikely at least for the foreseeable future. So the option is to look for seller carry-backs that can be in whole carried by the seller. This is available. The property above is a good example.
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