Owner Financing Case Study

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– I use private money to buy my houses

– I pay my Private Lenders 8% interest only 5 yrs.

NOTE: Bank money is 4% to 6% but you’ll sign a personal guarantee.

– This private loan is a NON-RECOURSE loan…collateral only loan…no personal guarantee.

There’s even ways to get 0% loans: go to and check out  Fund & Grow 

– I give the private lender a pristine 1st lien guaranteed by the title company

– Private Lender agrees (In the loan docs) to let me wrap their debt/note when I sell and offer “Owner Financing” to my buyer. 
The buyer/occupant pays me.
I pay my lender.

– I always borrow at least $2k more than the amount necessary to buy or to buy/fix. Because finding houses is not free; it cost money to find great deals! This money goes in my pocket and is tax deferred until a major event; I get paid off or sell the note and pay off my loan.

– I sell the property with owner financing. My private lender is in 1st Lien position.

My buyer owes me money on a note so I’m in the 2nd Lien position.

My Buyer/Occupant pays me, I pay Private Lender.
If My Buyer/Occupant doesn’t pay me, I still pay my Private Lender.

– I collect a healthy down payment that goes in my other pocket; 10% minimum.

– The “Taxpayer of Record” (the owner) is my Buyer/Occupant.

– The private lender and myself are lien holders.

– I contract to buy a HOUSE for $23k all in.

– I borrow $25k @ 8% interest only, 5 yrs = $167/mo.

– I sell the HOME for $57k w/ $5k Down.

– I finance the $52k balance @ 10.5% for 20 years = $525/mo p&I pmt

I owe $167 pmt/mo
I collect $525 pmt/mo
*In this example I’m selling the note before collecting even 1 pmt but normally you collect some, if not a lot, of pmts before you sell the note.

– I sell the $52k note owed to me
(and it’s incoming pmt stream of $525/mo) for $46k CASH + I keep the last 60 payments.
NOTE: The difference between what I’m owed ($52k) and what I sell the note for ($46k) is NOT a discount. It I a trade; I’m giving up $6k today for $31, 500 tomorrow. It is a time value equation. If I put the $6k in the bank at 10.5% for 20 years, it will be with $31, 500.

– I use the $46k CASH pay off the $25k I owe my private lender. I keep the difference;
$46k-$25k = $21k in my pocket.
and I’m still owed the last 60 payments of $525
(15 years from now)
60 x $525 = $31, 500

So let’s look at the 7 incomes:
(1). $2k when I bought

(2.) $5k when I sold to my buyer/Occupant

(3). *We could have made monthly cash flow but didn’t in this example

(4). $21k net from the note sale

(5). $31, 500 start collecting $525/mo in 15 years.
REMEMBER; you paid off the loan with the proceeds from the note sale, so you have no debt; you are collecting $525 and pocketing 100% for 60 months.

You have an opportunity to collect the payment as the “co-Note Holder” with your note buyer: the note was for 240 months…your note buyer bought 180 pmt you kept 60 pmt of the note…you are “co-Note Holders.

You BOTH have an interest in the note. You can charge a fee for that work if collecting and keeping track. You can pass that fee along to your Buyer/Occupant if you state so in the original sale/closing docs. A fair fee would be $35/mo 

240 months x $35 = $8, 400

(7). Late Fees
In this example no late fees are collected

+ $2k Borrowed Equity
+ $5k Down Pmt
+ $0k Pmts Collected
+ $0k Late Fees collected
+ $21k NET on Note Sale
+ $31, 500 Back-end of the note
(60 pmts)
+ $8, 400 Loan Servicing Fee
on a house I found for $23, 000

The TOTAL COLLECTED could be much higher if we’d have collected a few years of monthly payments.

The TOTAL COLLECTED would be drastically higher if this was a 30 year note instead of a 20 year note.

The TOTAL COLLECTED in this example assumes that all the payments were made on time and no LATE FEES are collected

In my humble opinion, OWNER FINANCING is the best strategy on the planet for an average Joe to acquire cash flow and wealth.

Check out my free webinar on how and why.

This is all accomplished Dodd-Frank and S.A.F.E. Act compliant using a Residential Mortgage Loan Originator (RMLO)

Go to and listen to my interviews with RMLO Grant Kemp and attorney Scott Horne.

Now, let’s go find some deals!





–Mitch Stephen–
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