Hi Ron, I wanted to put another face on what you have suggested here. This technique is a risky one at best and so here is the other side of this suggestion.
I would not recommend his to someone without great knowledge of what they are entering into, with or with out an attorney.
Especially an out of state (first time) investor or first time home buyer.
What do you tell your buyer when the owner takes out a new mortgage on the home and then defaults on his loan?, happens all the time! Can you be certain he will record payments to the credit agency(s) in a proper manner and on time every month for life of loan?
There is now way for this buyer to protect themselves in this scenario. Not only can they loose their down payment, all monthly payments, have no car, no boat and possibly angry relatives they also have ZERO equity. Then will need to fight eviction process and the lender who now wants the home and or their money back.
If that is not enough what if there's also an early pay off penalty and if so how much and is that negotiable.
Not to mention you want them to pay 7+%( probably more like 10%) interest, that is crazy! Especially when the banks I deal with have loan packages just for this purpose at a much lower rate that stated above.
I do not ever recommend Mega banks, I am talking small local ones or portfolio/direct lenders. They can close in a little as 20 days with much less interest rates..jeez 7%++ . That will certainly eat into some of your profits and affect your ROI.
I would also note that someone that has been in their home for 30 years and paid off the mtg, might want to continue to live there for little a while longer.
I would say YES to the savvy investor or one who has great knowledge of real estate, access to the tools and resources needed to handle this type of transaction and also understands all potential risks and things that can go wrong with a deal of this nature.
Post closing lawsuits among FSBO, note holders is one of the most litigious areas of real estate, Nationwide.
If your credit score is above 620 and you have 30 K, I can put you in touch with at least four lenders that can help you purchase an investment property. I have one that can close in as little as 10 days, another in 20 days.
I just wanted to show the other side of this suggestion.....it is on option, but again a risky one that should not be attempted for just a few of the reasons I have stated here.
I'm happy to discuss this with you in greater detail when you are ready.
I am easy to contact so please give me a call.