If you are having trouble qualifying for traditional real estate financing, buying owner financed homes can be a viable option. Owner financing, also referred to as seller financing, is a financial arrangement where the homeowner agrees to finance the sale of their property.
So instead of getting a loan from a mortgage lender or bank, the seller helps you finance the purchase of their property. You become the new owner of the investment property and make monthly payments directly to the seller over an agreed-upon period until the full amount is paid.
While there are several homeowners out there who want to sell their property, not many are willing to finance the sale. Therefore, it’s important that you learn how to find owner financed homes. But before we go into how to find them, let’s go over why you should consider this creative real estate investing strategy.
Benefits of Buying Owner Financed Homes
While they are not common, under the right circumstances, owner financed deals can be a viable option for real estate investors. Those who opt for this creative real estate investing strategy can benefit in the following ways:
Flexible financing terms
Unlike bank loans which have strict requirements, you can negotiate the terms, including interest rate, repayment schedule, and down payment.
Lower closing costs
Owner financing cuts down on closing costs since there are no bank fees or points.
You may close quicker since you don’t need to wait for the financing to be processed and approved.
That being said, real estate investors should also be aware that owner financed homes have some drawbacks for buyers. First, they usually have higher interest rates than bank loans.
Finding seller financed homes can also be a challenge. As mentioned, not many property sellers are willing to finance the property themselves. Therefore, investors have to get somewhat creative to find these properties to improve their chances. Below are some top tips on how to find owner financed properties for sale.
How to Find Owner Financed Homes for Sale
1. Real Estate Listing Websites
There are some real estate listing websites that include owner financed homes in their directory. An excellent first step would be to check Mashvisor’s listings. If the owner offers seller financing, it will be mentioned in the description of the investment property for sale.
Just because a seller offers owner financing, doesn’t mean it’s a good real estate deal. You also have to run the numbers. Sometimes the properties are overpriced and wouldn’t generate a good return on investment. Mashvisor allows you to analyze real estate deals. With our real estate investment tools, you can find investment properties for sale that have a high return on investment potential in a matter of minutes.
2. Hire a Real Estate Agent
If you are thinking about how to find owner financed homes in your area, you could hire a real estate agent or broker. An experienced real estate agent who has extensive knowledge of the local housing market may know about unpublicized owner financed deals in your area. They may know a homeowner who is motivated to sell and willing to offer owner financing. Apart from locating owner financed homes, they can negotiate better interest rates and terms with the seller and help you in closing the deal.
3. Check a Public MLS Website
Most MLS websites are usually reserved for real estate agents. However, there are counties that offer MLS access to the public. You can identify owner financed homes by checking the comments section of the property for sale.
4. Locate For Sale By Owner (FSBO) Homes
Another effective strategy for finding owner financed homes is to drive around your neighborhood of choice and search for “For Sale By Owner” signs. If the property catches your interest, contact the owner to see if owner financing is a possibility. If you ask enough homeowners, you will find a few who are interested in financing the deal. This is more effective in a buyer’s market where the seller has trouble selling their home and it has been on the market for a while.
5. Find “For Rent” Signs
Another great way to find owner financed homes is to find “For Rent” ads and signs and vacant houses. You can then track down the owner and contact them to know if they would be open to selling the property and financing the deal. Contacting a homeowner when their rental property is vacant can be a wise move. You might be surprised how many people are burnt out and would wish to retire from landlording. They might be fed up with bad tenants or other aspects of being a landlord but still want continued passive income. Therefore, owner financing may be a win-win for both of you.
6. Check Eviction Records
Another great way to find potentially burnt-out landlords who may be open to owner financing is to reach out to those who have been frustrated by tenants and have had to go through the taxing eviction process. You can find public eviction records at your local courthouse. You can then contact the owners and see if they are open to selling.
Networking is also a powerful tool for finding owner financed homes for sale. Attend local real estate investor meetups and other industry events. You may meet local investors who are motivated to sell their property. Ask them if it is possible to get owner financing.
Moreover, let your family, friends, and colleagues know that you are looking for owner financed properties. Word of mouth is always a powerful marketing tool and can never go out of style.
The Bottom Line
Owner financed homes are a great financing option for credit challenged real estate investors. Owner financed financing also offers several advantages that you can’t get from conventional mortgage lenders. Therefore, don’t let tight credit stop you from investing in real estate. If you follow this guide on how to find owner financed homes, you can still achieve your investment goals. To have a smooth transaction and avoid some of the common pitfalls of owner financing, it’s always prudent to hire a qualified real estate attorney.