‘Owner financing’ is a term often used in real estate investing. It simply means that a buyer is enabled to make the monthly payments directly to the seller of a house.

Owner financing allows the buyer to buy the home without applying for a mortgage. The seller can also choose to sell the loan to an investor for cash, because it’s a profitable investment.

When trying to offload this type of loan, there are a lot of factors to consider. An investor wants to know the condition of the home, the situation of the buyers, if the buyer is making their monthly payments etc. They see it as just another note to buy and they want to have a certain kind of security backing it up.

If you’re a seller, there are a couple of advantages to owner financing. Buyers will happily pay you market value and more, because of the special nature of this deal. They are motivated by the fact they don’t have to go and qualify for a mortgage.

With owner financing, you can sell faster and charge higher interest rates for the loan. Because of the special financing, many people will be interested in this type of deal. If you increase the interest rate, the loan note automatically gets more attractive to an investor.

The disadvantage is also pretty clear. There is a chance that the buyer stops paying. If so, the home will get into foreclosure with all it’s consequences. This is why you need to choose your buyer carefully. You can get some great monthly cash flow, but it can also fall apart, so choose wisely.