In today’s real estate market finding a home loan is tougher than ever, so before you gamble the farm just to sell your home, consider the facts about loaning your own money to the buyer of your home. Why should I do that, you say?

Let us just say, for this example, you have sold a property that you have fifty thousands dollars in equity in. Deciding to just sell it and pocket the big chunk of money may end up hurting you by increasing your tax liability. It is not only a matter of income taxes or municipal taxes that may affect your bottom line, and there are additional taxes that tax you at a higher rate. There are many rules that govern taxes like capital gains tax, so consulting with an accountant or other tax professional is really important in order to save your money and profits.

By leaving your equity in the property by carrying a note on it, you can avoid these taxes, or at least defer them until you can generate some income from the loan. Being the primary lien holder on the property is the ultimate goal, but if a bank is involved for the remainder you can bet they will not accept anything but primary lien position for themselves.

Another good reason to loan your own equity back to the buyer is so that you have a certain amount of control over the property. Most homeowners who are hopelessly behind will give you back the home long before they want or force a foreclosure or a short sale, due to the amount of stress they are usually under. Many homeowners who are in trouble are perfectly content with renting back from you so it is not typically a problem for you to take the home back. Either way you go with the renter, you have more control over how the situation ends up than a bureaucratic bank that will not bend over to help homeowners at all. Selling the property in the same fashion is not a hard task as their are many people with bad credit who want to buy a home.

Loaning your money out again will do a lot of positive things, including helping your next buyer improve their credit history, and bring you a nice chunk of change as you go along. Being financed out of the equation will inevitably happen, but all the while you will make a nice amount of interest.

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