If you currently own rental property you probably already know that managing tenants can be difficult, or even a terror. In fact, just one bad tenant who knows how to work the eviction process can make your life a living hell. If you haven’t had this happen to you, just ask me about more about this – I’ve been through it myself. TENANTS CAN RUIN YOUR LIFE IF YOU DON’T KNOW WHAT YOU’RE DOING!
Although I’m still new at real estate investing, I’ve tried incorporating a couple of new techniques to help me make more money, and work less, and not have tenants ruin my life. One of these techniques is the lease option, which I wrote about in an earlier post. Lease options are a great way to transfer risk to your tenants by requiring more money up front. Another technique is owner financing, which is probably one of the best ways to make more money and work less. With owner financing, you still keep the property deed in your name until you’re paid (if you’re smart), and the buyer pays the insurance, taxes, and interest to you!
But beware, by providing owner financing you become the bank, which means you must foreclose on the buyer if they decide not to pay you. As a result, providing owner financing may or may not be a smart choice depending on your state’s foreclosure process. For example, in Illinois the foreclosure process takes about 210 days from beginning to end, which means your property could be sitting for 7 months before you get it’s rented again (oouch!) However, the foreclosure process in Missouri is only about 60 days, which is about the time it takes for a typical eviction. In this case, providing owner financing in Missouri might be a better choice compared to Illinois.
I would really be interested in hearing your thoughts on owner financing. Have you tried it, and do you have any tips that would provide useful based on your experiences?