BiggerPockets

I have a house under contract for $115k. There is an existing mortgage on the property for $80k. I listed the property for $119k and I got an email from a buyer asking if we can carry if they put $40k down. Obviously at this point I don't know if the buyer is for real but I think I'll just play it like they are.

Previously, the seller said he needed his money out of the deal, which is $30k I believe. My question is, if the buyer is for real and has $40K how can I put this together? I'm sure you guys will need more info so just ask, I gotta take off right now.

Jeff

What are you thinking you will sell it for? Could you structure it as a sub 2 where you keep the seller's current loan in place? You can certainly create a second, from your buyer to you with the house as security. You can make that for any amount you wish. Since you're in second position, you have little leverage if the buyer stops paying. But, if you could pocket $5-10K on the deal, and have the potential for a payment stream, it might be worth the risk. With $40K into the deal, the buyer has a lot to lose.

So, $129K less $40K down leaves $89K. Leave the $80K note in place, create a new one for $10K. At 12% and (say) 10 year amortization (like a HELOC), due in three. Payments on that note are $143.47 and after three years they owe $8,127.41. You pay the seller $30K and pocket $10K. If they quit paying, you probably don't want to bother foreclosing, but you still have the $10K from the front end.

This all assumes the seller's note is reasonable (i.e., not an ARM that's about to do a major adjustment) and the seller is willing to go along with the sub2.

Good luck. Let us know how it works out.