Another case study you can profit from . . .
Michael Farris secured owner financing from the owner of the first property he bought, an automobile repair shop with a rental apartment above it. He really leveraged himself a great deal to put the deal together with very little money out of pocket. But six months into his ownership, the auto shop closed its doors and defaulted on its lease, leaving him with a large, unrentable space. Even though he was protected by the lease that the shop’s owners had signed, Michael quickly saw that taking them to court to collect unpaid rent would not solve his cash-flow problem, nor his inability to repay his combined owner financing and bank mortgage. He defaulted on his loan and was back to square one. “Actually,” he summarizes, “I am not back on square one because I defaulted on a loan and now have a black mark on my creditworthiness.”
What you can learn from these case studies. . .
• With careful planning and in the right circumstances, owner financing can benefit both buyer and the seller. The buyer can afford a more expensive property. The seller can often get his or her full asking price. That is what is called a win/win situation.
• It can be exciting to use owner financing to leverage your way into a building you could not otherwise afford. But doing so without sound planning and foresight is an invitation to disaster.
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