Seller Financing Might Not Be A Bad Idea: Part 3

Here are some advantages to seller financing.

1. Steady income.  You can set the payment to 20-30 years.  Better yet, you might want to make the payments into a 30 year amortized due in 5 years.  That way you can renegotiate the loan with the borrower after 5 years.  You might want to attach a prepayment penalty to the loan.

2. Pay less taxes.  If you sell the property and do not do an exchange you are subject to tax on the sale.  Contact your tax person or CPA for information on this  but basically, if you don’t do anything, you are going to pay tax on the sales price and if you finance to the buyers you pay tax on the down payment and the mortgage income you get from the loan.

3. You get out from being a landlord to being a lender.  A lot less work.

4. You can charge a higher interest rate than what’s available through conventional lenders.

5. You might get a better return verses a depositing the cash in a savings account or other investment at this time.

6. Less risky than other investments.  Generally the higher return, the higher risk.  Your income is secured by property.

7. You are helping a buyer who may not otherwise qualify to buy your home.

In Part 4  I will cover the risks and what can be done to avoid them.

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