Selling your house but carrying the mortgage?

[slickracer]

Have you ever gone through a foreclosure as a seizing creditor? Very expensive process for an average non business creditor-all of which is paid up front. Me, I'd rather get the renters to just buy them outright and get their mortgages from a third party. Remember this: if they are not credit worthy enough to get a third party mortgage, what makes you think they are credit worthy enough for you to give them a mortgage? Bad idea all around-looks good on paper, but remember people will trash a house facing foreclosure worse than a rent house facing eviction. I don't care how "good" the people are. Leave the money lending to the pros. If you want to get out of he rental business-sell the houses and get out.
This based on 40 years of doing this kind of stuff.

I could not agree more. Adding a prepayment penalty is short sighted…I would want the borrower to refi with a normal lender, not deter it.

My FIL had 3 private loans that my Wife and BIL inherited, thank goodness two of them had demand clauses and were refinanced. These types of scenarios are not risk/headache free.

 

[slickracer]

Lets say you finance at 5% for 30 years. That currently is a mid to low performing portfolio with a good financial advisor.

And it's liquid, a private mortgage is incredibly ill liquid.

 

[dogdoc]

Sounds like an incredible risk to take for a little money. Being a private mortgage provider would be the last headache I would want.

 

[ladder13]

In the modern era of squatters having ownership rights, hell no.

 

[biku324]

My father sold the same motel 3 times, always holding the note. He made money both times the purchasers gave up and left BUT he was extremely careful to whom he sold it. The final sale was a commercial loan and he got a check.

 

[444 Magnum]

My father sold the same motel 3 times, always holding the note. He made money both times the purchasers gave up and left BUT he was extremely careful to whom he sold it. The final sale was a commercial loan and he got a check.

From a legal aspect, financing commercial property and a personal residence are apples and oranges. There are far more protections for the consumer (truth in lending laws, disclosures, etc.) which can make financing and foreclosure (if needed) more challenging.

I wouldn't hesitate to finance commercial property or raw land, but, as I stated above, the average person can quickly get in over their head when financing residential property in today's environment without professional help.

 

[Yendor357]

The Buyer is at more risk than the Seller.

Really bad idea.

I've heard this question often when I was listening to Dave Ramsey.