I have an off-market deal I am working. Normally I figure my cash number and offer it to the owner and we work from there. This owner actually mentioned that he would be willing to carry it longer for a higher price. Now I have a few rentals but I normally just flip and would like to keep it that way. I use HML so I want to see if I can structure something with owner financing to save on those costs. Here are the numbers....
My Cash Offer- $120k
He Wants- $132k
So the house is already a decent deal but I would like to maximize the financing on this one if I can. I just have never set up an owner financing flip so how would you go about structuring this? Something like 5% interest only with a balloon in 12 months? He says he is not desperate for the money now and would like to squeeze out a bit more. This would probably save me about $15-20k in hml costs so I would be willing to give a little more for the right structure.
If the seller was any other person, how would you do the deal?
Also, is it worth it to keep the seller involved to save $3k to $5k? Does the seller know that you want to sell the home for $100k more than you're giving him?
Not quite sure I am following the question regarding if he were any other person. Normally I buy the house out right with cash or hml.
Yes when I go on calls I let the sellers know I will fix up the house to resell or rent it. They normally don't care as they have their reasons to sell and they care about the bottom dollar. In this situation he is tired of renters and tired of doing work on the house. He knows it needs work and doesn't want to do it. Rather leave it for the next man.
In regards to keeping him around.......the house would be sold so I am missing how he would still be involved. Just like my investors, he would get monthly payments and receive a lump sum in 4-6 months. My issue like you brought up, is it really worth it to increase the price to save a few thousands on financing. Good point.
Just ran the quick numbers....looks like my hml costs would be somewhere around $20k for this deal. Owner financing would be something like $4k. So if I go up to $132k with owner financing it increases my purchase costs $12k but saves me $16k in financing. So a net gain of $4k. Any thoughts?
@Derek Tyler was looking for threads on a flip using seller financing and enjoyed quickly reading thru this one...
what did you end up doing here?
@JamesSestito I ended up using financing. If I did owner financing on this one I would have done financing on the repair amount so I just did financing on the repair and buy through my normal guy.
@Derek Tyler - last question - 'your guy' meaning hard money lender?
@Derek Tyler , I was researching seller financing for flips & came across your thread, as well. How does one pay their contractor for repairs through seller financing? That's the thing I'm trying to wrap my head around, lol. :-)
@Derek Tyler - I'm considering acquiring a pre-market property as well and having the current owner finance me. I have cash for the rehab, and like you, want to spare myself some of the HML costs. I've read the MD rules for owner-financing and it looks like owner holds the title until final payment - do you know how that works for reselling after the rehab? I want to rehab, list, sell as normal to someone else - have you heard whether having owner-financed the purchase on my end introduces any obstacles to the sale after rehab? Thanks.
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