Help with Creative Financing!!

2 Replies

Hello Bigger Pockets! I need some advice on a creative financing scenario. My family member is about to lose her house to a short sale. The house needs work but would be a great fix and flip. She has it listed for $160k. My mom owns a house around the corner that is appraised at $330k. Same house but my cousins needs a $60k- $80k rehab. The recently sold comps in the area range between $345-$430k. My question to the bigger pockets community is about creative financing. I want to work out a deal with my cousin to give her some moving money ($15k-$20k) assume the mortgage, Rehab it, and sell. What would be my best options to make this happen with little to no money out of pocket? I have a contractor that will partner with me on the Rehab and cost of the Rehab. But I need to know what steps do I take to make this happen. Should I go to the realtor (which I am friends with) and try to negotiate a better price with the bank or offer my cousin the money to sign over the deed to me and bring the balloon payment ($25k) up to date, then renovate and sell. Any advice would be helpful Bigger Pockets community. Thanking you all in advance. PS... I already own a LLC that I created for flipping but have not used it yet..

First, you can't just "assume" the loan.  There's about a 99% chance that mortgage contains the standard verbiage around acceleration, if the property ownership is transferred.  Which means the bank could call the loan due immediately, without all the lengthy non-sense required to foreclose, if the property is transferred to you.

Second, you need to know, directly from the bank how much it would take to bring the loan current and avoid the short sell.  

Now, if I'm doing my math right, even taking the high-end estimate of the rehab costs and the low-end ARV estimate, you've still got about $105k of potential profit/equity in the deal. What if you partnered with your cousin and did seller financing on the property? All you would have to bring to the table would be the $ needed to bring the loan current. If you have a contractor ready to bring money to the table for the rehab, plus moving money for your cousin, perhaps those funds could be used to cure the loan, then supplement the rehab with hard money? Lots of options, when you have that much potential profit available.