For the folks here who have held long term mortgages for people, what is the ideal situation you look for? In regards to the house, terms, the buyers themselves, etc.

Good questions. Of course the answer varies, depending on you, your situation and what you expect in the future.

I've got several long term buyers. The things I looked for when I made the deals have now changed. So I would not do these deals the same way now.

But at the time I did the deals I looked for and made the deals this way:

The situations:I looked for people who had good prospects of long term employment. Not fast food, gas station workers or clerks at a store. Not minimum wage or close to it workers.

I looked for people who wanted and expected to live in the area long term, not someone who would move away at the first problem or who was easily transferred. Someone who had long term family in the area. Someone who had kids. Kids that would be going to school for years. I look for people that are not afraid to maintain and do repairs and actually WILL do them as opposed to talking about them. Blue collar working families.

I like to get fixer uppers, make sure the major systems are OK and let the new people do all the cosmetic stuff. NOT like the tv shows where the place is 100 percent when they move in.

The house: Could they afford it? 25 percent of take home pay as a payment. Fenced yard. Garage, if possible. OK neighborhood. Basic. Pets OK. Easy for them to fix.

The terms: Depending on the condition of the house, a downpayment that they would not want to walk away from, either in cash, or in some cash plus labor and materials they supply to do any repairs needed. I like to put a time limit on some of the repairs needed to make sure they actually do these repairs (I don't want them to move in cheap and then do nothing). Until they meet the terms of the agreement, I like to make it an OPTION to purchase that will then convert to a regular land contract when do their part. I like to have pretty high interest rates on the amount I am carrying, like 10 percent. As rates are low now, this encourages them to get the repairs done and refinance asap, if they can. They must pay property tax and insurance, naming me as additional insured. (From experience, collect this in escrow like the big companies, otherwise, they conveniently "forget" to pay and this leads to problems, which means me paying. If that happens, all amounts I pay get added to the total due, but that's not really a good way to do it. You want to collect that money, not let it build up).

It's best to have a local lawyer/title company/escrow company (whatever is commonly used in your area) draw up the papers because mistakes are easy to make. And expensive. Some title or escrow companies will handle the collections of the money and the disbursements for you, for a small fee. I prefer a direct bank debit from their account to mine. This lets me know immediately if payment has been made or not.

Depending on your states rules/laws, handling non payers can be fairly easy or real hard, especially with new rules coming from the govt lately. Best to discuss this with a lawyer, because you don't want non payers in your place long term. As well, some states have restrictions on owner carry loans, or whatever term is used in those states (Texas comes to mind). That's what the lawyers help with.

NOW, with the current things going on, I'm seriously considering SELLING the notes I'm holding on places to a note broker. These people or companies buy notes. They analyze the buyer, the loan, the interest rate and the property and then will make an offer. If everything is good to excellent, you'll get a good price. If there is anything they don't like, the offer will be lower. Also, different note buyers will give a different offer on the same place, so it pays to shop around if you want to sell the note. One reason I like to sell to note buyers is to reduce my risk, PLUS it gives me cash to go after the next deal.

Make sure you don't buy and sell the same methods.

When you are buying a place with owner financing, get it broke down to a first and second.

When you are selling a place, create a wrapped note.

Why the break down.....so you are paying on a 90,000 and 10,000 second to the seller. The seller says hey I really need that $10,000 paid on that second. How do you respond? The correct answer is well its not due for another 3 more years but, I could pay it to you now - if you are willing to discount the note.

Now when you have a wrapped note....especially on a subject to deal, you are amortizing the loan full term.....and not when your part of the sandwich is paid off.

I just did one in February for a contractor I’ve known and used for years. So I know his character. He sold his house so had money to put down, purchased price was $235,000. He put down $80,000 which was about what I paid for the house in 2011. I financed $155,000 for 20 years. He already asked if he could pay down another $50,000 from selling a classic car he owned.

I didn’t want to go over 20 years due to my age.

I’ve done two 30 year mortgages for others I’ve known well who are financially responsible. Did another 20 year at a higher rate for another contractor friend who I trusted. He refinanced after five years.

The one I did for an “unknown” person in 2015 I amortized for 40 years but charged a higher rate than the others, 6.5%. I included a 10 year balloon to force them to refinance. They’ve been trying to refinance now for a year. They are also the only ones who have ever paid late. House has appreciated greatly but I really don’t want it back so I will be glad to get rid of it.

I don’t recommend financing for anyone who can’t get a loan on their own. I’ve mostly stuck to those who could but financed them to save a boatload of closing costs and of course for diversification.