Banks are being more strict than ever with whom they lend money to, so if you are a home seller you really need to consider becoming the bank, and loaning our your own equity to a prospective buyer. How would that help, you ask?

Let us just say, for this example, you have sold a property that you have fifty thousands dollars in equity in. Selling the property and accepting that one lump sum may expose you to certain taxes and lower your profit potential from it. There are more taxes than the usual income tax and state taxes that can take your real estate profits, such as capital gains tax for one.

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 loaning the buyer back your own profits you can offset or delay nearly all of these taxes, and continue to make interest on the loan. Whatever you do, make sure you are the primary lien on the property or else you will be assuming a higher degree of risk, and may be left out in the cold if the homeowner cannot pay for the home.

By loaning on your own property, you have a very proactive opportunity in dealing with the home owners and can cut off any foreclosure by dealing directly with the borrower. If the buyer does get behind on payments, you simply go to them personally and express some empathy for them, then offer to take the property back through a deed in lieu of foreclosure. Most people do not want the shame and embarrassment of being foreclosed on, so they will iron things out with you, if for no other reason than to salvage their credit history. From there you can rent the property back to them or you can send them on their way and look for another buyer to sell it to. Buying a home is on the forefront of many minds, so loaning out your money on it again is not too difficult.

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. The homeowner may even eventually refinance you out of your lien position altogether.

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