Are there exit strategies that are better suited for seller financing? For example could you buy, fix, sell a home on seller financing? Could you get into some legal trouble if you try bulldozing a home on seller financing?
A property requiring significant renovation might be a candidate for seller financing, followed with post renovation traditional financing. However a deal should work on it's own with normal financing. Seller financing is best when it can be a win/win scenario - for example the seller would prefer the income over the normal lump sum payment from selling property.
Ideally you would have the cash to pay for a tear-down and demolition. I think it would be hard to get a construction loan if you don't own the land free and clear.
YES you can absolutely buy fix sell on owner financing!! It's a relationship so I would assume that your seller would be aware of what you would be doing.
You would want in your "Maker and Beneficiary agreement" to specify that the note will be moved to second position for construction loan.
This would be a hell of a lot cheaper than Hard Money
Then at the time of sale you would have 2 options. 1. Cash out the note or 2. Leave the note in place to be secured against another property you have or use the extra cash from the sale to purchase another property and secure the note against that one.
So lets say you purchased the property for 120,000 and sold it for 200,000. You did 30,000 in repairs. The seller financed 100,000 at 5% interest only payments for 15 years. To make it easy I will leave out the interest on the 30,000 in repairs.
You sell the house for 200,000 and you secure the note on your duplex that has 120k in equity and cashflow to support the payments. You walk away from closing with $170,000
A lot of this will depend on your state.. In Indiana the difference between land contract/contract for deed and rent to own is foreclosure(12+ months) vs eviction(1-2 months)... Frank dodd may also get in the way on how you utilize seller financing so you will need to check on that.
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