Hello, I am a very active wholesaler and realtor out of the greater Seattle area, but new to the subject of owner financing. I have a deal I know I can't wholesale, but I have already got the seller to agree to owner financing or a lease option. I want to owner finance the home from him and then owner finance my interest to someone else (Pretty much executing a wrap).
I am not sure if this is a possible way to structure a deal, but the numbers make sense. Here is the example
My Purchase: $270,000 owner financed (Home is worth about $330,000)
4% Interest only on 5 year baloon with option to cash out at anytime. = $10,800 / 12 = $900/month
Home Insurance = $2,100 / 12 = $175/month
Property Taxes= $3,700 / 12 = $308.33
= $900/Month + $308.33 + $175 = $1,383 / Month for ME
Now here's how I would sell it:
Sale Price: $325,000 seller financed with 10% Down
$325,000 - $32,500 = $292,500 Remaining balance
$292,500 financed at 5% Interest on 2 year balloon amortized over 30 yrs + option to cash out at anytime
Principal = $9,750 / 12 = $812.50 / month
Interest = $14,625 / 12 = $1,218.75 / month
Taxes = $308.33 / month
Insurance = $175/ month
NEW OWNERS TOTAL = $2,514.58 / month
My total = $1,383
Cash Flow = $1,131.58 / month + $32,500 upfront profit from down payment + Difference between my sales price and remainder purchase price from the new buyer at the end of their balloon.
IS THIS POSSIBLE?
Kind of. What you are skirting around and through is a Sandwich Lease Option.
@Joe Villeneuve this would not be a lease though, as it is being owner financed. I talked to my attorney today and he said it would be possible.
@Jacob Lemke I think any smart buyer would see you just paid $270k for something that you're turning around and offering for $325k. With the market starting to flatten, I certainly wouldn't pay $55k extra, regardless of the terms (IMO).
I've purchased a number of owner finance deals and the attorney for the seller would always put in a "due on sale clause". So I wouldn't be able to turn around and give the new buyer title. As a buyer, I wouldn't proceed without getting title.
My 2 cents..