Hello Bogleheads!
We have a house. It was our primary residence. We are thinking about offering owner-financing to sell it as-is. It needs a new roof, so a buyer can't get a traditional loan right now. We've had a couple of people sniffing around about buying as-is. We can swing the finances to do it right now and would offer the loan through a separate LLC/corporation. I want to make sure we're not missing anything to consider before going down that road. We're in FL and I'm a real estate attorney, although I am pretty niche and do more litigation than transactional work. I can do a lot of the paperwork and closing to minimize expenses, but some of the tax/financial implications are beyond my knowledge.
Pros: Income stream, but we're not renting it out and don't have to do the maintenance (we crunched the numbers and renting *might* break even, but certainly won't be profitable), interest rates on mortgages are high right now, keep the Save Our Homes portability for the next house (FL will reduce the taxable basis of your homesteaded home), will still get $500k capital gains exemption for sale of primary home.
Cons: Low-ball offers for as-is sale, risk of buyer not paying the mortgage and having to go through foreclosure process, risk of buyer not paying property taxes and have to fight for priority over property tax lien.
Unknowns: Can we require some kind of bridge insurance policy while the buyer gets the roof fixed or does such a policy even exist? Should we think about escrowing insurance/taxes? Paying income tax at a higher rate on interest income versus paying lower capital gains rate if we rent for a while then sell?
Any additional input on pros/cons of owner financing is appreciated!
We have a house. It was our primary residence. We are thinking about offering owner-financing to sell it as-is. It needs a new roof, so a buyer can't get a traditional loan right now. We've had a couple of people sniffing around about buying as-is. We can swing the finances to do it right now and would offer the loan through a separate LLC/corporation. I want to make sure we're not missing anything to consider before going down that road. We're in FL and I'm a real estate attorney, although I am pretty niche and do more litigation than transactional work. I can do a lot of the paperwork and closing to minimize expenses, but some of the tax/financial implications are beyond my knowledge.
Pros: Income stream, but we're not renting it out and don't have to do the maintenance (we crunched the numbers and renting *might* break even, but certainly won't be profitable), interest rates on mortgages are high right now, keep the Save Our Homes portability for the next house (FL will reduce the taxable basis of your homesteaded home), will still get $500k capital gains exemption for sale of primary home.
Cons: Low-ball offers for as-is sale, risk of buyer not paying the mortgage and having to go through foreclosure process, risk of buyer not paying property taxes and have to fight for priority over property tax lien.
Unknowns: Can we require some kind of bridge insurance policy while the buyer gets the roof fixed or does such a policy even exist? Should we think about escrowing insurance/taxes? Paying income tax at a higher rate on interest income versus paying lower capital gains rate if we rent for a while then sell?
Any additional input on pros/cons of owner financing is appreciated!
Statistics: Posted by egf1978 — Mon Oct 28, 2024 8:47 pm — Replies 5 — Views 334