I never looked to a bank as my first option when it came to financing a rental property. But sometimes the bank will work with you!
There are a lot of creative financing avenues available if you know about them.
If the owner was willing to help me, I didn’t quarrel too much about the terms.
The interest rate, loan amount, or down payment, didn’t worry me that much. My main concern was the monthly payments. How much was I going to put in my pocket each month. I didn’t care if I was paying for 30 years instead of 20 years. If the interest rate was 7% or 9%.
Was my monthly take home 200 dollars or 300 dollars? That was my bottom line.
A guy at the factory was going bankrupt. For whatever reason, he simply stopped paying his house payment. He also had a rental property. I approached him. Would he be interested in selling his rental? I was too late. The bank had already repossessed the house. I still asked him, did he have any problems with the renters? Maintenance? What problems did he have with this rental? None was the reply. He stated that a single guy was living there, and had lived there for a couple of years. He was a perfect renter. He kept the house and property neat and always paid the rent on time. He didn’t have a single problem with this house. (Why he didn’t make the house payment I’ll never know!) I called the bank, and set up a appointment with the banker.
The banker said they had the house, but the paperwork for repossession wasn’t complete. I guessed the previous owner probably walked in and gave the keys to the banker. The bank had the keys, but not ownership.
If I wanted the house, they would stop the foreclosure procedure, and give the house to me. I could take over payments. The banker then made an offhand comment, that if I hadn’t come along; he was looking at buying the house as a rental for himself.
The banker said that I was doing the bank a great favor. I was saving them the legwork, and all the paperwork involved in foreclosure. The banker then said he would set the first house payment for ninety days in advance to help me out. My closing cost would be 700.00. The rent was 300 dollars a month.
Two months rent before the first house payment would be 600 dollars -- minus the closing cost of 700 dollars. My cost involved to own this house was 100.00 dollars! My house payment was going to be 200.00 dollars a month. My profit per month would be 100.00 dollars.
I purchased the house without inspecting it, talking to the renter, anything. I made my decision based on what the banker and previous owner had said.
The house was a 2 bedroom log cabin on a lake. It was about a 45 minute drive away. I normally don’t recommend buying a rental property this far away, but this deal was too good to pass up.
After I purchased the house, I drove out, and met the renter. I told him to mail the rent to my address. I also gave him my phone number in the event he had any problems.
He paid the rent regularly. The previous owner was right, he was the perfect renter. Maybe once or twice a year, I would drive by the house to do a visual inspection. I never noticed anything wrong. The renter lived there for five years.
Deals like this don't come along evey day, but they do happen!
