“I’m a big believer in owner-financing,” Kristin Gerst, managing partner of Capricorn Mortgage Investments, told an audience at Think Realty’s National Conference & Expo in Dallas, Texas, on February 24-25, 2018
Dallas, Texas – As mortgage rates rise and credit requirements on traditional mortgages from conventional lenders remain stringent, creative financing is becoming increasingly common in the real estate space. One of the most common forms of creative financing, seller-financing or owner-financing, is also one of the most attractive options because it reduces the responsibilities of property ownership for the seller while creating a cash-flowing mortgage note. That note is an independent asset that may be bought, sold, or even leveraged in some cases. Owner-financing operates independently of the broader real estate and lending markets because the decision to make the loan relies on the agreement between the buyer and the seller of the property, not on predetermined qualifications set forth by a bank or other lender.
“I’m a big believer in owner-financing,” Kristin Gerst, managing partner of Capricorn Mortgage Investments, told an audience at Think Realty’s National Conference & Expo in Dallas, Texas, on February 24-25, 2018. Gerst offered two sessions of training at the event: a one-hour breakout session on Saturday and an extended session on Sunday. Gerst dealt with the finer points of setting up owner-financed notes, buying, and selling them, including addressing important parts of the transaction that must never be overlooked, how to legally create an owner-financed note, and risks and pitfalls in the process.
Gerst imparted dozens of helpful tips. Here are three things every investor must know about owner-financing from her primary breakout session:
1| Owner-financed notes must be set up correctly. What is legal in one state may not be legal in another. For example, contract-for-deed notes may not be legal in all states. Make sure the terms of your note adhere to all lending regulations that apply in the area where you are investing.
2| Owner-financed notes, when done right, are “mailbox money.” If you have ever heard the term “mailbox money,” which refers to money that arrives regularly from investments that do not require extensive ongoing maintenance, then you have probably heard someone talking about note or loan payments. “With rental properties, you have uncertainty because you don’t know what might go wrong at any point,” Gerst said. “With notes, however, you know how much money is going to be in your account.”
3| Lots of investors think owner-financing is illegal. “Owner financing is entirely legal when it is set up correctly,” said Gerst. She added that many investors find it more beneficial than selling via conventional financing because owner-financed deals allow the buyer and seller to set up the terms of the loan to suit both their needs.
Learn more about owner-financing, the Dallas event, and how to make sure you don’t miss the chance to attend the next Think Realty National Conference & Expo in person by clicking here.