Dave,

Having the many up's and down's that comes with life and the decline of higher paid jobs, I find myself still wanting to stay here in the valley. I have lost everything due to poor planning. With that being said I still have my family and many, many assorted pets on a very small pension. I will not part with them and am looking for work. Renting and lease option seems to be out of the question and buying anything is a no go for 7 years. After living in a camper for 8 months, I have decided to cash out my 401k and look for land. My question is, where are the "owner finance or carry terms?" I know they are available, but most Realtors are not educated to the old school term. Should I just run my own ad and work a deal? Given the owner attitude of “my land has gold and overpricing” in most areas I would think this is a 50/50 win solution on both sides. Payment terms for them and a beginning for us.

Edward, location withheld

Edward,

Life does have its ups and downs. Remember, it’s how you deal with the adversity in life that really does shine the light on your true character and it is clear you are a fighter! It appears that you have learned from your past “poor planning” and are working to right the ship for you and your animals. Living in your camper for the past 8 months is proof that you are making a significant effort to stay in the valley and you should be proud of hanging in there. Things will turn around, but it may take time and a plan. Sounds like you are now working on a specific plan in place. With your assorted pets, I am sure you are right that renting will prove to be very difficult, however, don’t rule out a lease option or owner carry.

There are opportunities for a lease option and owner carry, however, to really have a chance at either one, you will have to have a significant sum of money to put down. Generally, I recommend a seller receive between 10% & 20% down to get involved with a lease option or an owner carry situation. Cashing in your 401K may be the key that opens the door to the down payment needed. I do not agree that “most Realtors are not educated to the old school term.” Actually, I do think they are educated to the term, but there are fewer opportunities available to initiate owner carry terms. It is my experience, and please understand that my experience is limited to the past 13 years, that there are not a plethora of owners who are really interested in owner carry terms or lease options. It is VERY rare that I have an owner who is looking to solicit an owner carry opportunity. I believe most owners who are working with real estate agents are looking to SELL in the near term because they have other plans for where to use their money. You are absolutely correct, an owner carry or lease option scenario can be a win/win for both parties, as long as the owner is looking for income and not looking to get the total sum of their investment out. I also believe that running your own ad may be a very good idea.

“I think running your own ad “seeking owner carry terms or lease option” might prove more successful than you might expect. I find property owners who are interested in lease options or owner carry terms are not typically mainstream. ”

I think running your own ad “seeking owner carry terms or lease option” might prove more successful than you might expect. I find property owners who are interested in lease options or owner carry terms are not typically mainstream. They tend to have different investing and financial practices that fall outside of normal real estate agent practices. You might also seek out agents who deal with owner carry clients. There are agents who tend to have that kind of client. Just call the owner/brokers at different real estate offices and ask them which agents are most likely to work on those kinds of deals. They will know and help steer you to the correct people.

I can feel your frustration and am sorry your journey is proving difficult. I am prayerful that you find the new beginning you are seeking and I am confident you will.

Dave Kimbrough
The Kimbrough Team

Dave,

My wife and I wish to sell our home and retire to Arizona. We are in a position that we would consider doing “owner financing” when we decide to sell. Our money market investments are a lousy return and doing owner financing with the sale of our home appears to us as an opportunity to earn 4% - 6% with minimal to moderate risk. The way we look at it, if the buyer fails to make the payments, we simply get the house back and reassess our options. Is this right? What experiences, good or bad, have you had with sellers who have done an “owner carry” with the sale of their homes? Any advice would be appreciated, Merry Christmas.

Jim and Marybell, Grand Junction

Jim and Marybell,

Great question! The move to Arizona sounds like an excellent idea, as we near the dog days of winter. Please remember, I am not a financial adviser and will only be providing an opinion that is based on my personal experience. Should you decide to move forward with an owner carry on the sale of your home, I would urge you to discuss any ramifications with your financial adviser or accountant. If done correctly, this can be wonderful addition to your retirement portfolio.

There is no doubt money markets are not a high yield investment, actually they are a terrible rate of return at this point in time, but they are very safe, with virtually no risk. Money markets also provide you a high degree of liquidity that you will not receive if you do “owner financing”. Prior to stepping into an owner financing option with your buyer, you should first consider how important liquidity is in your retirement plans. Also, consider the fact that you will still have a home in an out of state location and this can prove difficult and burdensome, even under the best of circumstances. Let’s assume that you decide this is the route for you, then I can say the success of your owner carry sale is determined by the terms set up at the time of sale.

You need to decide on an interest rate that will work for you. As I am sure you are aware, current interest rates are hovering around 4%, so I would expect it realistic to get somewhere in the 5.5% - 6.5% range. You also need to decide if it will be an interest only payment or if some of the monthly payment will go towards the principle amount owed. To make things cleaner, I would suggest an interest only payment with a balloon on the full amount owed. After coming to terms on the interest rate, you need to decide what length the loan will be, more often than not I see a 3-5 year balloon. You can get your attorney to help you work up the note and deed of trust that will spell out the exact terms of the loan and where the payments will be made, what happens in the case of default, etc. Accuracy on this document is of vital importance.

“The last detail, but the most important, is the down payment. The owner carry deals I have seen be successful are the ones where the buyer puts some “skin in the game”, meaning that they bring a substantial amount of down payment money.”

The last detail, but the most important, is the down payment. The owner carry deals I have seen be successful are the ones where the buyer puts some “skin in the game”, meaning that they bring a substantial amount of down payment money (10-20%). The down payment encourages the buyer to stay in the deal and gives you some cushion should things not work out as anticipated. The down payment acts as your insurance policy. Another option is to charge a higher interest rate with lower down payment and this will provide you with more monthly income, if the highest rate of return is your primary goal. With this tactic there is more risk, but you get a greater rate of return. In the back of your mind, always be prepared and understand what will need to be done should your new buyer fail to perform at some point down the road. Prepare for the worst and pray for the best! : )

All things being equal, owner carry terms can prove to be a wonderful vehicle for income and quite possibly could fit in perfectly to your retirement plans. Set it up right and it should provide a good source of revenue! Merry Christmas.

Dave Kimbrough
The Kimbrough Team