By MORRIS ‘MO’ SMITH
Beyond The Clippers
When looking over ways to get into real estate and start investing, owner finance deals might be the way to go for a new real estate investor.
An owner finance deal is when the owner of a property allows you to sign a promissory note and make payments towards owning their property. It’s basically a pay-to-own deal where you only deal with the owner of the property directly instead of a bank or another type of lender.
A lot of people don’t have enough money to make big down payments or their credit isn’t good enough for them to get a home loan. These are common problems and the usual suspects on why people don’t get into real estate.
If you have a good steady form of income but bad credit, an owner finance deal might be the way to go.
One of the pros is that it doesn’t involve your credit or go against your credit report. Another is that the owner might be willing to work with you when it comes to financing the deal.
However, if you fail to make a payment or get behind on your payments, the owner is able to immediately take possession of the property.
Additionally, most of them come with high-interest rates.
If you’re considering an owner financing deal, first make sure your paperwork is straight. It’s common for them to have a lot of different clauses that you might want to be careful of. It would be wise to make sure that the property owner adds to the terms of their contract that there are no prepayment penalties.
In all honesty, you should treat an owner finance deal similar to the process of buying a home. You still want to get a title search and title insurance.
A title search examines public records to determine if the person you’re dealing with is the legal owner of the property. They also allow you to discover if the property has any claims or liens. Ideally, you want a clean title before you move forward with a transaction.
And title insurance protects lenders and homebuyers from losing money due to a defective title that would stop the owner from transferring the property.
If you don’t want to be a homeowner or a landlord, properties acquired through an owner finance deal can be flipped, if your goal is to be a flipper.
As with any real estate strategy, make sure you do your research before you move forward. Not every good deal is good for you.
Real estate expert Morris Smith of Beyond the Clippers provides tips to newcomers on how to handle owner finance deals. Smith is the owner of Sideline Cutz, a barbershop located in the Grant Park neighborhood of Atlanta, and works as a real estate agent and investor with several properties under his control. Morris Smith can be reached through https://www.beyondtheclippers.com.
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