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Investing in Real Estate Using Owner Financing

Whenever you hear someone talking about buying "on terms," they are speaking of creative financing. Creative financing refers to any method of financing besides the traditional method. Knowing these methods is essential to savvy investing because they allow you to buy properties using the much-talked-about OPM (Other People’s Money). Savvy investors often try to use as little of their own money as possible. This allows their money to stretch further so they can buy more investments. The first creative-financing method you’ll need to be aware of is “Owner Financing” also known as a “Seller Carry Back.”

In this financing strategy, the seller agrees to carry the note for your purchase. This will happen when you find a seller that owns his/her property free and clear. They don’t want the property anymore, but they don’t mind receiving a monthly payment on it. Most of the time, however, the seller will place a time limit for when the note must be paid in full -- typically, between one and five years. This is a great way to finance a real estate investment as long as you realize you’ll need to refinance later. Remember: It's easier to qualify for a refinance loan than a purchase loan.

This is my personal favorite financing strategy. I love the fact that I can write my own terms of the loan. Everything is negotiable. I can negotiate that there will be a balloon payment, and if so how much it will be, I can even negotiate price & interest rates. Everything’s negotiable! I Love it.

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