owner finance or be a landlord?

[rcardin]

Which would you rather do?

Is it better to secure your properties under agreement for deed and carry the note or continually rent them out? I currently have my only investment property under agreement for deed on a 40 year note. It pays of in 10 so I should have some change coming in for retirement out of this house. Doing this I lost all of the tax benefits of being a landlord though.

We are looking for our next property to buy but don't know which approach to take from here. Section 8 is also a possibility for guaranteed rent payments.

 

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[tbsells]

There is nothing wrong with your strategy. Many people use it and make money. But, I personally don't like it. Here's why: I want to have control over my asset or I want to have my money. In your case the asset is tied up for 40 years. I know it cashflows and that's great, but if you need (or want) the equity out of it you can't get it. Also, if he quits paying you will likely have to go through a foreclosure process which is time consuming, stressful and expensive. I prefer a straight rental agreement. I rent it to the people as long as I want to and as long as they pay rent. If I change my mind and decide to sell it, I can. If they don't pay an eviction is much easier than a foreclosure. If they decide they want to buy it, I can sell it to them if I want to. I have a means of accessing my cash (equity) if I want it or need it. I have sold on L/C before but have only carried the financing relatively short term. Usually two years and then the buyer must refi and pay me off. It worked out. I just don't like having my options taken away and I feel like a long term L/C does that. You might consider a lease with option to purchase if you are looking for other alternatives. Its probably the best of both worlds.

 

[EasyMoney_in_NC]

I would agree with the above ^^^^
accept the comment about not being able to get equity out. Most likely, in time, you would be approached by those looking to purchase your note (although it will be at a lower value than face).
If this is your only property and need the monthly money AND you are retiring, I would certainly stick with the landlord option for the above reasons. If you had more time, money etc, then maybe the owner financing route would be a decent long term play. But as slow as RE tends to move, like TB I would keep your ability to liquidate as open as possible (rent it).

 

[rcardin]

Texas lease option laws suck for us. You have to be creative to get around it. My agreement for deed states that if they are late making payments they immediately revert to tenant status. This allows me to go into eviction rather than foreclosure. They also have to stay for 5 years before they can refinance. If they decide to sell I get first right to buy the property back for the equity they have invested in it. No realtor fees. My dad uses the same strategy and has had no problem.

I like the idea of liquidity if needed though. It might be a good idea to keep a nice combonation of both.

Just wondering why people would prefer one method to the other.

 

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[EasyMoney_in_NC]

hmmm.......very interesting, would you happen to have a blank copy of such a contract that you'd be willing to share? since we are far enough apart and not in any competition with one another

 

[rcardin]

Let me find one for you. It is on my home computer.