1018 Grosvenor (Rent, Hold, Sell)

1018 Grosvenor (Rent, Hold, Sell) A house with two bedrooms, one bathroom, and a small garage apartment. (1982) The house was rented for $175 per month and the renter had been there seven years, the rear apartment was empty. The price was $32,000 with no down. I countered with $1,000 down and 10% interest on a 20-year note. The monthly payments were $299.16 per month.

The owner wanted interest income and no more landlord problems. They added a due-on-sale clause* and a pre-payment penalty of 5%, declining 1% a year after five years so that the house would not be re-sold quickly. I paid the $1,000 down, because I did not want the seller going to the closing and having to write a check. Paying something down makes for good relations, and less chance of the seller wanting me to pay their closing cost.

The advantages were:

1. Owner financed.

2. No credit check.

3. Reduced closing cost and no points.

4. At the time 10% was a good interest rate.

5. No tax and insurance escrow.

6. Low down.

7. Positive cash flow.

I raised the rent on the front house to $275.00 per month, the renter moved out after six months. I then rented the house for $295.00 per month. I rented the back apartment at $150.00 per month. Over the past twenty years this house has provided me tax savings, and a small positive cash flow.

After about five years, the rear detached apartment was torn down as the cost of repairs to keep it in a livable condition would be more than the rent could produce in ten years, plus tearing it down ended the parking problem. After owning this home for 15 years I sold it to the tenant on a contract for deed for $38,000 with $2,000 down on a Twenty-Five-year loan at 8% interest. The principal and interest payments of $365 per month will total $109,000 over Twenty-five years. As the house is paid for (by the renters over the years) the $365 a month is all profit. Here is a case were the renters over the years paid for an asset that will continue to pay me for many more years.

At the time I purchased this home mortgage interest rates were at 21%. The good news for real estate buyers back then was that property owners could not sell due to the high interest rates, and owner financing was the only way to sell a house. Today with low interest rates, you have to explain the advantages of owner financing to the sellers, but it can be done. * A due on sale clause requires that the mortgage be paid in full if the owner resells the property.