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My husband and I own rental properties. I've given some thought to what we'll do when we want to get out of the landlord business.

Personally, I very much like the option of seller-financing.

That is, for the $175,000 house, she accepts a 20% down payment ($35k) then writes a mortgage at a reasonable rate. Lets say 6.25%. That's a monthly payment of $862. If she invests the $35,000 and gets a mere 5% interest, that's an additional $146. In other words, she can convert the property into an income stream of approximately $1000. What's more, she no longer has to pay property taxes and insurance which together must be $200 a month or so. She also avoids landlord headaches and losses due to vacancy. What she loses is the potential for capital appreciation. However, if she's satisfied with the income stream, it seems like a fair trade-off.

There are also tax-advantages of receiving the money in an installment loan.

If you go this route, I recommend using an escrow company as a middle-man to receive the payments. They receive the mortgage payment from the purchaser and distribute the money to the seller each month. At the end of the year they provide tax statements to both parties and to the IRS.

Hope this helps!
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