Updated over 6 years ago on .
Pricing Land Contract on Flip
My husband and I purchased a flipper last year, 2 bed 2 bath modular home on 2 acres, 2.5 miles outside a Midwestern university town of 100,000. When the flip is done, we'll have $90k-$100k in the property in a mix of out of pocket and a construction loan. One of the contractors for my husband (we'll call the person Pat) is REALLY interested in buying the property, but with a land contract due to some rough financial stuff in their past. Since my husband is responsible for Pat's income at the moment and looking ahead, we know Pat has income. If we go this route, we'll probably do 7% interest on the land contract.
We're working on the numbers now to see if Pat is still interested & can afford monthly payments, and I'm curious about what price we should put on the house especially since we'll benefit from interest. Zillow has the property at about $131k. If I use the 70% rule for flips using $95k, the price comes to around $136k.
So my question is- with a guaranteed buyer willing to pay 7% interest, is it worth dropping the sale price a bit (like to $120k) so Pat can definitely afford payments? Anybody have good math or calculators on this type of situation?