Learn about owner financing, its pros and cons, and how to find owner financed homes in Fort Worth by reading this blog post.
Fort Worth has some of the nicest and most interesting neighborhoods in the state of Texas. Even if you are not thinking about moving away from your current home, you can consider investing in a rental home in this location instead.
But what if you cannot afford a mortgage to finance your purchase? Is there another option for you to buy a new property? The short answer is: yes, you could look into owner financed homes in Texas.
In this guide, you will know:
- What owner financing is
- The pros and cons of investing in owner financed homes in Fort Worth
- Ways you can find owner financed homes in Fort Worth
- Five best Fort Worth neighborhoods to buy an owner-financed home
What Are Owner-Financed Homes?
Owner-financed homes are properties purchased with the help of the seller. A home is usually the biggest investment a person would ever make. And its heavy price tag often requires the homebuyer to finance their purchase. The most common way to do this is by taking out a mortgage.
But not every homebuyer can meet the strict requirements for getting a traditional mortgage. One option for them to afford a house, then, is to have the seller finance their purchase.
For sellers, financing the purchase of their home gives them a faster way to close the deal. This is because buyers will not have to go through the lengthy mortgage process. They may also be able to sell their home as-is, so they will no longer have to spend on repairs and upgrades on their property.
Unlike a mortgage lender, the seller who is financing does not hand over the money to the buyer. Instead, they extend enough credit to the buyer in order to cover the purchase price of their home, minus the down payment. The buyer then will make regular payments to the seller until they have paid the full amount.
Pros and Cons of Investing in Owner Financed Homes in Fort Worth
While owner financed homes in Fort Worth can be a good option for real estate investors like you, it involves risks that you need to know about. Here are the pros and cons of investing in owner financed homes in Fort Worth:
Pros of Investing in Owner-Financed Homes
#1: Close the Deal Faster
You do not have to wait for the bank loan officer, underwriter, and legal department to process and approve your loan application.
#2: Closing Costs Will Be Cheaper
The closing costs you have to pay for will not include any bank fees or appraisal costs. This is because you are not borrowing money from a financial institution. Also, owner-financed homes are usually sold as-is.
#3: No Need to Meet a Minimum Down Payment
Unlike the bank or the government, which require a minimum down payment for you to take out a loan, you can negotiate with the seller how much down payment to put in.
#4: A Great Alternative for Investors Who Cannot Get Financing
Whatever your reason for not being able to secure a mortgage, getting owner financing will help you afford your next investment property.
Cons of Investing in Owner-Financed Homes
#1: You Have to Pay Higher Interest Rates
Because of the risks that the seller will take in financing your purchase, you will likely pay higher interest than you would if you took out a traditional mortgage.
#2: The Seller Has to Agree to Finance You First
Because the seller is the one to pay for your purchase at first, they need to agree to your proposed terms like the interest rate, repayment schedule, and consequences of default. Also, they will most likely run a credit check on you before they approve the arrangement.
#3: You May Lose Your Newly Purchased Home Because of the Due-on-Sale Clause
If the seller you are dealing with has an outstanding mortgage on the property you are buying, then their lender can demand immediate payment of the debt in full once the house is sold. Most mortgaged homes have a due-on-sale clause, which states that the remaining balance of the mortgage must be repaid in full upon the sale of the property.
Usually, sellers will use the sale proceeds to do this, but since they are financing your purchase, they may not have the means to pay back their own mortgage. If the lender does not get repaid, then they will foreclose on your newly purchased property.
To avoid this risk, stick to buying owner financing houses that are free and clear of any mortgage or lien. Another option is to have the seller’s lender agree to owner financing.
#4: Your Payments May Balloon After Several Years
It is typical for owner-financing arrangements to require you to make a balloon payment after five or 10 years. This is because you should have enough equity in your property or an improved financial situation to qualify for a mortgage by then. But if you still cannot secure a mortgage by the time you are due to make a balloon payment, then you could lose both the house and the money you have spent so far.
However, you could avoid this if you are buying a house from a seller who has already sold at least one other owner-financed home in the last twelve months. The Dodd-Frank Wall Street Reform and Consumer Protection Act set a number of limitations on owner financing unless the seller qualifies for the one-property exception.
4 Ways to Find Owner Financed Homes in Fort Worth
If you are a real estate investor in Texas looking for other options to afford an income property, you might want to know how you can find owner financed homes in Fort Worth. Here are some ways to do this:
Real Estate Listing Websites
Many real estate websites display listings of various properties, including owner-financed houses. One great example is Mashvisor’s Property Search. Using our platform, type in the area where you want to buy a property (e.g. Fort Worth, TX) on the search bar. You could also narrow down your search by configuring more filters like your preferred minimum beds and baths, target monthly rental income, and property type.
Owner financed homes in Fort Worth would have this purchase arrangement in the listing description, but you may also try to negotiate this payment method with the property owners.
Of course, you should not just pick the first owner-financed property you find; you also need to consider its potential income. This is why Mashvisor is the research tool of choice for investors in real estate. Aside from showing thousands of listings across the US, we also provide in-depth analysis including estimated rental income, cash-on-cash return, and 10-year payback balance. This will help you determine whether a particular property is worth investing in.
Real Estate Agents
Realtors and brokers in your area may know about deals that are not made public. They may also know a motivated seller who would be willing to finance your purchase of their property.
For Sale by Owner (FSBO) Listings
If you find a property that is for sale by the owner, reach out to the seller and ask if they would be willing to offer owner financing.
Rental Listings
If you see a home you like that is not for sale but is for rent instead, ask the owner if they would be interested in selling their rental property with owner financing. Who knows, you may find someone who is tired of being a landlord but still wants to retain that monthly income for several years.
5 Best Fort Worth Neighborhoods to Buy an Owner-Financed Home
If you are planning to buy an owner-financed home in Fort Worth and turn it into a rental, check out these five neighborhoods considered by many Texans to be the best in the city:
#1: Arlington Heights
This neighborhood is located north of I-30 and below Camp Bowie Boulevard, a major area filled with retail shops, restaurants, entertainment, and necessities for nearby residents. If you want to invest in an Airbnb rental, consider buying a property here. You can use our Airbnb calculator to find out the earning potential of houses in this area. The neighborhood mostly consists of suburban houses, making it the ideal location for guests who want yard space while still having access to activities in Fort Worth.
Those staying in Arlington Heights have easy access to some of the best museums in the city and are only a 10-minute drive away from restaurants, shops, and a movie theater.
Most of the homes are cozy and craftsman style, which would catch the eye of tourists looking for a place to stay in Fort Worth. Expect to cater to families and groups of young professionals.
#2: Fairmount
Fairmount is a historic neighborhood near the Southside district. It lines right up with the popular Magnolia Avenue, which has great spots for food like Ellerbe Fine Foods, Avoca Coffee Roasters, and the original Heim Barbecue.
Because it has the best of both worlds–charming homes and fun activities–Fairmount is a great location for Airbnb rental homes.
#3: Westcliff
This is another great neighborhood for Airbnb rentals in terms of cash-on-cash returns. But because Westcliff is right next to Texas Christian University, you will also earn a considerable profit from leasing out properties to college students.
The neighborhood has easy access to Amon G. Carter Stadium, so Airbnb investors can expect sports fans from outside the area to stay in their property during football season.
#4: Benbrook
If you want to acquire a property that you can lease out, consider investing in a home that is located in this neighborhood. Benbrook is considered to be one of the best suburbs in Fort Worth to raise a family. It boasts beautiful waterfront views, a lot of greenery, and many outdoor activities for families.
Airbnb investors would enjoy high returns here as well. You can rent your property out to tourists who are looking for a cozy escape but want to stay near downtown. Among the things to do in Benbrook include water activities at Benbrook Lake, hiking at Oakmont Park, and horseback riding at Benbrook Stables.
#5: North Richland Hills
Despite being a mid-to-high-end suburb in Fort Worth, North Richland Hills offers a low cost of living, abundant green space, and many activities for people of all ages. Investors who want to rent out to families with disposable income would want to buy a property here. Expect your tenants to be families with young to teenage children, since the neighborhood is near great institutions.
If you want to put up an Airbnb, this neighborhood is a great place for that as well. North Richland Hills is near NRH20 Family Water Park, NYTEX Sports Centre, and Walker’s Creek Park, so expect to be fully booked during the summer and football seasons.
Find Owner Financed Homes in Fort Worth With Mashvisor
Owner financing is not a common arrangement, but it is a great option for property investors who are new to the game. But before you decide on whether to do this, you need to be aware of the pros and cons of buying an owner-financed home.
For example, buying a property with owner financing could help you close the deal faster. But the seller must first agree that they will finance your purchase before you can get the ball rolling.
If you are considering buying an owner-financed property, you can find this type of home in several ways:
- Browsing real estate listing websites like Mashvisor;
- Talking to real estate agents;
- Reaching out to FSBO sellers; and,
- Checking rental properties.
Since Fort Worth is a big city filled with endless earning potential, here are five neighborhoods where you can start your search:
- Arlington Heights
- Fairmount
- Westcliff
- Benbrook
- North Richland Hills
When buying an investment property, whether it is owner-financed or a different type, it is in your best interest to use real estate tools like Mashvisor when doing research and analysis. To learn more about how we will help you make faster and smarter real estate investment decisions, click here.