[Pedro Machado]

Pedro Machado

I’ve been approached by sellers who have little equity, but decent loans. I think I can help them sell with owner financing, but the loan balances are too high for me to want to be responsible for the payments.

As an example:

House value: $135k-$145k
Loan: $130k @ 6.5% 30-y fixed

My thinking is that I could find someone who would give me $5k down and wrap the existing loan at a higher interest rate.

Because there is not much equity, I would not want to buy the house subject to or wrap the existing loan myself and be stuck with the payments on the underlying if things go bad.

Jackie,
I believe you have talked about getting options on these kinds of deals and selling them to the final buyer. In those cases, do you let the seller wrap the loan and the buyer make payments directly to the seller (without you being in the middle)?

If so, how do you address the seller’s security need when the final buyer most likely represents a bigger risk than you as an investor?

Does anyone else have any ideas?

Thanks,

Pedro Machado

[Anonymous]

Anonymous

Pedro,

I do these deals both ways. Sometimes I stay in the middle and sometines I do not.

To make the seller feel better, just tell them that if they have any problems with the buyer to let you know and you will help resolve the problem and help get another buyer if necessary.

Another way to structure this would be to buy with a preformance lease with an option. Then sell with a lease option. With a performance lease, you are only responsible for making payments when you receive payments and you can reduce your responsibility for repair costs.

Ownership of real estate is not always the end game — you really just want to control it.