Is this a good candidate for owner financing?
I've never done an owner financing deal, so I'm wondering if anyone here could look at the situation and let me know what they think. It could be I'm completely wrong and that another exit strategy is even better....
The lowdown: I'm in Los Angeles, where the property is located. Single family home. Owners live out of state (in WA). They bought the place for their daughter to live in while she was here in college (must be nice!) and she's since graduated. They have a family friend in the property now as a tenant.
They're looking to sell but are not distressed at all. Not in arrears. Never been late. Tenant is also current on rent. They plan to list it and just leave it up on the market until it sells, which, around here, would happen very quickly due to shortage of inventory.
I estimate the ARV at $527K. House is in excellent shape and needs, at most, interior paint. Owners owe $200K on a conventional 30 year fixed at 5.5%. No prepayment penalty.
My question is this: is there ANY option I can present to them that would be better for them then listing it and selling it the old fashioned way?
Here are my thoughts... would love to see what you guys think and if I'm completely off-base:
Seeing as they're under no pressure to sell, they're obviously not going to accept a cash offer (on a $550K ARV I'd normally offer about $405K cash). The owner told me explicitly that they want top dollar for the place and they're willing to wait in order to get it.
I'm thinking that I could offer then an owner financing deal that goes something like this. I give them a 10% down payment towards the $527K and they finance the rest to me under the current terms of their mortgage. I'll then turn around and sell it (or lease option it?) to someone else whom I'll qualify -- someone who is just under the bar of being able to get a conventional loan but is still someone who can pay the bills. I get a 20% down payment from my buyer (covering the 10% I put down and keeping 10% for myself) and finance to them at, say, 8%. So what I end up with is $52K in my pocket and a monthly cashflow in the difference between the 5.5% I'm paying and the 8% i'm charging my buyer.
NOW, assuming that this clusterf*** of a transaction that I just described is even feasible, my next, and more important question is, what can I tell the current owners that will show them that this option is better than just listing it and selling it the old fashioned way? Again, my thouhgts that I'd love feedback on: (1) they no longer have to pay property taxes, but they still are collecting a check every month for MORE THAN their mortgage payment (cashflow for them every month). (2) They avoid having to pay upwards of 24% in taxes on the lump sum they'll receive by selling with an agent. (3) They'll avoid having to pay the realtor's commission.
Thanks in advance for anyone who actually read this whole thing. I would really REALLY appreciate anyone who has any input.