CLICK HEREto return to discussion topics
MrLandlord Q & A
Best held mort. scenario (by NE [PA]) Apr 19, 2021 7:19 PM
       (by Ken [NY]) Apr 19, 2021 8:30 PM
       (by Sisco [MO]) Apr 19, 2021 8:53 PM
       (by Richard [MI]) Apr 19, 2021 8:56 PM
       (by Ray-N-Pa [PA]) Apr 19, 2021 9:59 PM
       (by LisaFL [FL]) Apr 20, 2021 9:08 AM
       (by NE [PA]) Apr 20, 2021 10:14 AM
       (by 6x6 [TN]) Apr 20, 2021 10:29 AM
       (by Ray-N-Pa [PA]) Apr 20, 2021 4:14 PM

Click here to reply to this discussion.
Click Here to send this discussion to a friend

Best held mort. scenario (by NE [PA]) Apr 19, 2021 7:19 PM

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.

Best held mort. scenario (by Ken [NY]) Apr 19, 2021 8:30 PM

I like to hold mortgages on houses that i bought cheap but dont want to rehab myself because they will cost too much to do the work if i pay someone.I get them cheap like $3000 then sell and get my purchase price back in the down payment,sell for like $25000 with $5000 down and $400 month till paid off,i often dont even charge any interest.I have 2 types of buyers,someone who buys it to live in and fixes it little by little to live in it and i have a few young guys who will do the work themselves to rent it out or flip it and they buy 1-2 a year from me pretty regularly

Best held mort. scenario (by Sisco [MO]) Apr 19, 2021 8:53 PM

Inside my SD Roth IRA was my favorite. I was able to avoid a taxable event on the sale.

Best held mort. scenario (by Richard [MI]) Apr 19, 2021 8:56 PM

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.


Best held mort. scenario (by Ray-N-Pa [PA]) Apr 19, 2021 9:59 PM

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 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.

NOW The master mind part of this method: What does the wrap allow you to do? You could sell future payments to someone's IRA and get cash now for larger deals. or since inventory is low currently, sell the current payments and keep the future payments for when the deals are ripe for the picking. You are then able to move cash in the future of a real estate cycle. --24.154.xx.x

Best held mort. scenario (by LisaFL [FL]) Apr 20, 2021 9:08 AM

I just did one in February for a contractor Iíve 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 didnít want to go over 20 years due to my age.

Iíve done two 30 year mortgages for others Iíve 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 ďunknownĒ 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. Theyíve 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 donít want it back so I will be glad to get rid of it.

I donít recommend financing for anyone who canít get a loan on their own. Iíve mostly stuck to those who could but financed them to save a boatload of closing costs and of course for diversification.

I guess it depends on if you need the money immediately or not. I didnít.

Best held mort. scenario (by NE [PA]) Apr 20, 2021 10:14 AM

So basically if the house lends itself to that type of sale and I'm in the position to do it? I'm not sure how the whole IRA thing would work.

Best held mort. scenario (by 6x6 [TN]) Apr 20, 2021 10:29 AM


Best held mort. scenario (by Ray-N-Pa [PA]) Apr 20, 2021 4:14 PM

Do you still have my number? I'll be free tomorrow evening to help you set it up --24.154.xx.x

Click Here to send this discussion to a friend
Report discussion to Webmaster

Subject: RE: Best held mort. scenario
Your Name:
Your State:


Would you like to be notified via email when somebody replies to this thread?
If so, you must include your valid email address here. By entering your email address here, you agree to receive notification from every time anyone replies to "this" thread. You will receive response notifications for up to one week following the original post. Your email address will not be visible.
Email Address: