How Owner Financing Works

  • 4 years ago

You have heard the term “Owner Financing”, but let's talk about how it actually works in real life. You have two parties in this transaction. You want to buy something and the other person wants to sell.

The purpose of owner financing is facilitating the transaction without needing 100% of the cash. Watch the video to see the benefits of owner financing.

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Video Transcript

J. Massey here, with; and in this video, I'm going to explain how owner financing works in two minutes or less.

So, you heard the term “owner financing.” Let's talk about how it actually works in your real life.
So you've got two parties to the transaction. This is you over here, you want to buy something, and then over here you have the other person who wants to sell something over here. There are the only two people.

Well, see, the purpose of owner financing is to facilitate the transaction; make it happen without needing a hundred percent of the cash.

So you by default don't have all the cash required to buy whatever it the seller is selling. So for you the benefits are you can do this with less cash. Want to be other benefits especially if you’re the seller are typically that the transaction can close quickly.

So this can be a situation in which thing we wanted a car etc.; are you could literally buy a car today, with a hundred percent seller financing, if the seller didn't need any money right now you two can draft up a document on a piece of paper; have it notarized; and the transaction is done. So you had less cash but the car if it was a problem car could be taken care of immediately today.

Now, the fun part is, that there are additional benefits when it comes to you being able to control more assets — faster when you do this; and for the seller they often but not always pay mass in taxes; overtime. Because they get to spread out what typically is known as capital gains over time, in over a number of different years, as opposed to taking the really big hit right up front.

So there are benefits and times were this happens and is something you should all do, depending on your current situation but definitely make sure you talk with your tax professional before you execute one of these transactions regardless on the type about that you're looking to buy.

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