An investor client just sold a piece of vacant property to a couple who want to build on it. Since he is in first position, and intends to stay that way, I think he is doing well with that sale. He has some income every month, and the property will only increase in value if a home is built on it. I was his broker for the transaction.
However, this client handled an earlier sale of a 4-plex himself. It was owner financing, with the seller in first position. Not too long afterwards, the seller had to take it through foreclosure for non-payment.
What did he get back? A gutted 4-plex on which no repairs had been done. There were no tenants because it was not habitable. He had to put quite a bit of money into the building just to get it into a condition where he could rent it out. That included appliances that had been taken out.
This was a very expensive lesson for him. Maybe if he had used a REALTOR(R), he would have been guided through some pitfalls.
Some homeowners or commercial property owners, I understand, are considering owner financing as well. There are so many things to consider before agreeing to such a transaction:
1. Who makes sure the property taxes are paid.
2. Who makes sure there is enough insurance on the building.
3. Will the property be owner occupied or become a rental? If commercial, who will be the tenant, running the operation?
4. Repairs, keeping it in sound condition, inside and out.
5. Why does the buyer not get a loan? What is his financial background?
6. Stay in recorded first position.
THIS IS JUST A PARTIAL LIST OF WHAT TO CONSIDER.