I am looking at REOs (real estate owned by banks) to buy and hold and then place tenant/buyers on a lease option. I would collect the option consideration and offer rent credits as usual.

I was also thinking that if the tenant/buyer can get a mortgage of 80% LTV, I would owner finance 20%, resulting in a no down payment for the t/b. Great deal for the t/b. Of course I would need a property that has the equity, and I am sure there would be some repair costs to factor in.

Has anyone dealt with REOs? I would try and have the same bank with the property do the financing, as they maybe more motivated to finance to get the property off their books.

Does anyone know where I can research how to:
-Write up a promissory note or mortgage for my 20% owner financing, then I guess I would record it?
-And if the t/b buyer can get an 80% LTV mortgage are banks today cool with me carrying a 20% note as the down payment?

Thanks for any input!

Steve, I haven't done an REO in many a year. I did a few back in the day but found it aggravating and frustrating. Dealing with layers of pencil pushers and bureaucrats wasn't my idea of smart real estate. Things may be different now, so I could be way off base here.
Hard to say what a particular lender might say to your 80/20 plan. They're in a first position so you would think they'd be OK with it. But I think much will depend upon the credit markets and the real estate market at the time of the sale to your t/b.

Hey Steve. I can't answer your questions about contracts and paperwork, but I agree with MC that the bureaucracy isn't worth the time. If you can find a great deal, then I'd say go for it, but don't hold your breath. I tried contacting REO agents and banks a few months ago with the same idea you have. It took forever to get even basic answers (the bank took three days to verify with a manager if they were allowed to tell me the price!). Now that REO's are the hot new investment strategy in the late-night informercial world, the banks are realizing that they can drive prices up and make some money. Competition for these REO properties is fierce.

Thank you for the replies.

Many banks post their REOs online and of course they are listed with a realtor. So maybe the realtor can earn his keep at coordinating offers in to the bank.

I am not really a foreclosure or short sale guy and thought the back end of the foreclosures, REOs, may be a way to pick up a long term hold or two. REOs are the left overs of the foreclosure process but with so many foreclosures there may a good REO deal on the back end.

I have worked with an investor that picks up REOs and then he calls me to L/O them if they don't sell quickly. As we are sitting at the bottom of the market, seems buy & hold is a good long term idea and using L/O techniques as an exit strategy is a good fit.

Steve, You can probably find your answer at flippinghomes.com its wholesaler Steve Cooks site. Also you'll find tampasteph there and she has a pretty good blog. Diver

Thanks Driver! I'll check it out.