I listened to a webinar the other day that had an interesting idea. They called it residential backflipping. I'll try to lay out the basics from that webinar here (this is what Peter Conti and Jerry Norton were saying):

Characteristics of house/loan that are good candidates for a back flip:
-It must be a high end home with a loan of $417,000 or greater (these jumbo loans are less likely to have been packaged and sold in a security, which makes them much easier to deal with and profits are larger).
-Owners must owe more than the house is worth.
-Owners want to keep the property.
-Owners don't want to hurt their credit (short sale, foreclosure, etc. are other options for them but will destroy their credit).
-Owners must be current on the loan's payments.

4 Steps to completing a back flip:
1. Establish the current value of the house-make sure loan is greater than value.
2. Determine the Price to Buy the Note- Take 80% of the current value of the home (the owners will be able to refinance at 80% LTV to pay you off once you buy the note). Subtract the amount of your profit (10-15% of the current value). This will give you the highest price at which you can buy the note.
3. Exit Plan, Owner Approved-Get the owner pre-approved for the refi at 80% LTV.
4. Buy note, close on refi-They said you could do this in 7 to 10 days, but i'm not sure why you couldn't set up a simultaneous closing.

Here is an example they gave (they said it was from a real deal):
$1.2 million loan
Value of $1.05 million
$800k refinance amount
$700k Note buy price
$100k profit

I am interested in doing deals like this because their are a lot of high end homes that are underwater in my area (San Diego). Here are my questions:
Has anyone ever done anything like this?
Are simultaneous closings on this type of deal possible? This would limit your risk of the buyer walking after you have bought the note. Are there other ways you can think of to limit this risk?
I think the best way to find owners that are underwater is advertising (craigslist, bandit signs, etc.), does anyone have other ideas?
Can anyone recommend any hard money lenders or transactional funding lenders that might be willing to do this type of deal?

I do not want to pay for the program ($1000), I really want to learn how to do this on my own, so I really appreciate any help or advice anyone can give. The program will give you access to lenders and tell you how to do it all, but they will only give you $10k per deal out of the profits, so I'd rather get the whole profit. Thanks for your help and ideas!

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