Seller holds the note while you flip.

[Cody Campbell]

I'm working on a deal to buy a house. Currently the house is a 3b/2b home with partial basement and detached garage and is on the market for 119k, local comps show same area and same size at around 120-130k. The house is in much needed repair. I'm going in to purchase the house at 50k with 35k in rehab costs, am I'm also offering 20% of the profit after the flip. My question is how do I write up for the seller to hold the note? Should I do 15yr with payments beginning in 90 days? 30yr? It's a hypothetical question but would truly love some feedback. Has anyone done this? Seller hold the note during the flip?

[Tom S.]

@Cody Campbell  I've done a similar flip before, price was $80k, I offered 10% down and the seller held the note for $70k (seller financing).  It was a pretty big rehab project that took $50k and 6 months. So I needed $58k in cash to do the deal ($8k down and $50k rehab).

I always do mine as a 30 year amort and a 5 year balloon.  I didn't offer 20% of the profit after the flip - I was doing the seller a favor by taking off their hands because it wasn't selling.  The monthly payment will be fairly small so the payments now or starting in 90 days should't be a material amount of the whole project.

You need to make sure they own it free and clear otherwise it could trigger the "Due on sale" clause.

Get a good attorney who's know the latest seller financing laws.

Note after doing this a few times, I found it was easier to reach out to small local banks that could provide purchase + rehab funding all in one close.  Easier and less stressful.

Good luck!

- Tom