Mortgage Blog

Landlord to Lender

By June 30, 2014July 20th, 2021No Comments

The Easy and Natural Transition

If you currently own property that you are renting out to tenants, it is definitely worth considering making the transition from landlord to lender. As a landlord, you bear a considerable amount of responsibility when it comes to the properties that you own. When a maintenance nightmare becomes reality, you bear all of the costs, less whatever service charge you have levied on your tenant. When a tenant falls behind on rent, you are the one left holding the bag — and often falling behind on your own mortgage for that property.

Being a landlord pros and cons

First, let’s look at the pros and cons of being a landlord. If you have tenants who pay on time, take good care of your property and are happy to pour rent into a large financial hole so that they can have the security of you handling all of the maintenance requests, then more power to you — and to them. As long as these tenants are willing to stay over the long term, you have a reasonably reliable income stream. However, there are some cons to the job as well. First of all, if your tenants are not careful when it comes to your property, you can face far more repair bills than you need to. If a cold winter storm hits town and your tenant is too lazy to open the doors under the sink and to keep the hot tap water running in the house, you can end up with a huge repair bill that was totally avoidable.

The fact that many people in Alberta and BC have decided to be landlords indicates that there is a good deal of money to be made this way. You might think about joining or as a member. The information and insights you receive from this connection could greatly augment your real estate profits.

Whether you’re ready to move on from being a landlord over your property to a lender depends in large part on the equity that you have in your home. If your home is worth $300,000 but you’ve used sound money management to get that equity up to, say, $270,000, why wouldn’t you want to transition into a lending role? First, you would no longer be on the hook when repair needs come up. When a person buys a house through a bank, the seller is no longer responsible for repairs that happen after closing — it’s all on the buyer. Get Started with our Fast Pre-Approval Form!

You might be wondering how you would choose a potential borrower for your landlord to lender conversion. Obviously, the person renting the home now would make a solid choice, if the financials make it. However, there are other people out there looking for a private mortgage, and this is a way that you could enter the housing market.

So here is how it would work. You would approach the current tenant (or other prospect) with the proposal. If your borrower either has good enough credit to get your attention as a lender or has a large down payment on hand, then it’s time to give moving from landlord to lender serious consideration. Then the two of you would work with a company like Coin Mortgage or Amansad Financial to turn the situation to your mutual advantage. You could extract a down payment from the buyer, followed by regular monthly payments until he has met the price.

Once the two of you find common ground, then you execute the sale. Once you have the property in question sold, and the income you are making is in the form of loan payments, you can take it easy, because lenders have a lot less to do with property management than landlords do.

If you are curious about this process, contact a professional at Amansad Financial. We have considerable experience at helping landlords make that transition over to being successful lenders. You’re turning what used to be rent into an influx of loan payments. If you lend that money at 5 percent, you can do much better with the process, bringing back returns of 12 to 15 percent with that same money. No matter what you decide, the best plan of action in a case like this is to get on board as quickly as you can and leave the position of “landlord” in your rear view mirror.

Get Started Today with our Fast Pre-Qualification Form!