Why Owner Finance?

Successful real estate investors know that it takes many strategies to build a thriving real estate business. Investment properties require you to decide the best exit strategy, and there are many great options out there depending on the needs of your business. Owner finance is one of the many excellent strategies you should depend on as an investor, and as a licensed professional RMLO, Lone Star Origination can help you to get there.

If you do not already utilize owner finance as one of your exit strategies, consider the financials below to see the potential savings offered by owner finance rather than renting out an investment property:

Rental Loan (20-yr, 7% Interest Rate)

After- Repair Value (ARV):                                        $100,000.00
Loan Amount:                                                                $70,000.00
Monthly Cashflow:                                                             $127.29
Annual Cashflow:                                                            $1,527.48
Rental Annual Profit and Loss
Rental Income:                                                               $14,400.00
Taxes:                                                                                 $1,000.00
Insurance:                                                                             $800.00
Loss-to-Lease (Vacancy):                                                 $2,160.00
Note Payment:                                                                  $6,512.52
Maintenance:                                                                    $1,200.00
Management:                                                                    $1,200.00
Total Income:                                                                  $14,400.00

Total Expenses:                                                               $12,872.52

Wrapable Loan (20-yr, 8% Interest Rate)

After- Repair Value (ARV):                                          $100,000.00
Loan Amount:                                                                  $70,000.00
Monthly Cashflow:                                                               $465.71
Annual Cashflow:                                                              $5,588.52
Wrapable Annual Profit and Loss Income*:              $12,614.64
Note Payment:                                                                    $7,026.12
Total Income:                                                                    $12,614.64

Total Expenses:                                                                    $7,026.12
*Wrapable “Income” is from the note with the end-buyer.

As you can see, a rental property is more costly (but still worthwhile!) investment. Maintenance and management expenses are a serious chunk of annual expenses, and even if you manage rentals yourself you will be busy (and therefor kept from the business of your real estate investing!) handling calls, organizing repairs, and being plugged in to the day to day of property managing. Don’t misunderstand — rentals are a great idea. But there are other ways to put your investment properties to work for you to build wealth.

Owner finance offers the same benefits as holding a rental, but without the monthly costs of management and the headache of frequent repairs. When you owner finance your investment property, you and your buyers both win — they gain access to homeownership when traditional banks would not lend, and you win as your property brings in cash and frees you to move on to the next deal.

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