Can I wholesale a Owner/Seeller financed agreement?

4 Replies

I live in Louisville Ky, and I'm new to real estate. I'm still researching exactly what I want to do but I had this idea that I haven't heard anyone talk about before.

If I were to get an owner to agree to seller finance their home(assuming that the home is owned free and clear) on terms including an assignment clause, could I then turn around and wholesale the agreement for a premium tacked on to the end buyer's down payment?

For example:

If I could get an owner to agree on seller financing a house for $100k, 10% down and 0% interest for 30 years giving me monthly payments of $250. With such a low payment it would be easier to cash flow. Assuming fair market rent for this property was 900/mo and after conservative expenses it cash flows $225 giving me a cash-on-cash return of 27%, could I then say turn around and wholesale the deal for 10k to an end buyer giving him a cash-on-cash return of 13.5%?

Could this work? Is it Legal? Am I missing something?

 Yes there are several ways to do that. You aren’t missing anything. In fact, you’ll probably make a great deal. 

What your describing is called wrap around financing. Most commonly a wrap is done when someone buys a property with financing (usually from a traditional lender) then sells it to a second party for more money, higher interest, etc. most likely on an unrecorded contract for deed. What you are proposing is to sell a turn key rental as a wrap. I would think most people looking to buy a turnkey rental would want a deed but I've been party to properties sold to other landlords on C4D with wrap financing, just never turnkey. Retail buyers whom could not get conventional financing were our primary customer base.

First, there is no such thing as a zero interest loan. Even if the papers say it, the authorities would not treat it that way. So factor a reasonable interest rate into your numbers.

Second, any owner financing is typically based on the owner's evaluation of the buyer's creditworthiness. You likely can't just pass that on to a third party. Perhaps form a new entity and sell the entity to the end buyer.

Good luck.

@Chris Rand There are some different opinions here and each of them have some good points.  I'll try my best to condense them into one post here.  

In order to keep that financing in place you would have to close on the deal, meaning owning the property.  If you were to wholesale that deal to someone else you would be selling the rights to buy the property and not the right to the financing.  Since the financing in that case is the decision of the seller, he would have to agree to the financing with the new buyer too.  It might be possible to get the seller to agree but I feel based on experience that this would be difficult. 

As another post suggested, you could close on the transaction, secure the note to the deed (which would make the financing be permanent), and then sell the home to another person, keep your 0% rate in place,  and "wrap" another mortgage around your financing.  So while the payment you make is $225, the new owner's payment to you is $X (based on what interest you are charging) and you get to keep the profit.  Then you don't worry about the maintanence, renters, etc.  I've seen 0% rate, I've seen mortgages with no payments, and other stuff too.  But when I negotiate with people on these loans they buy into the fact that I will be the person signing for the loan.  

Hope this helps some but feel free to ask more questions.  Thanks!

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