Selling Homes to Investors on Terms

[Patrick Sears]

Hello,

I was wondering what y'all thought about paying all cash for low-end fixers, NOT fixing them up, and then offering to sell them on terms to local investors looking to fix and flip or fix and rent?  Trying to get away from the rental/landlord thing...

Some thoughts:

• Example: Buy a house for 20k-40k; sell to investor for $5000 down, 12% int, 240 month amort with 3-5 year balloon?  These types of homes around here will rent for $800-$1100 all day long depending upon # of bedrooms
• Season for 6-12 months then sell either the whole note or a front-end partial to a note buyer
  • What would the discounts be for either scenario? Recourse vs. Non-recourse?  Would there be a strong market for these notes?
  • If I sold a front-end partial, would the note buyer get put on the title as a 1st position lien holder?
  • Would it make things easier if I tried to structure this as a land contract/contract for deed to my investor/buyer?
• Sell to investors with LLC's only to avoid Dodd-Frank issues
  • Or get my mortgage origination licensing and sell to everyone? 
  • Can I make decent money originating loans for other investors?

I've read a couple of ebooks on the subject; they are ok but not exactly college-level reading, at least not from a finance perspective.

Would it be realistic to turn this into a full-time business and build a 100+ note portfolio of these things?

Thanks!

[Account Closed]

@Ken Yu, a note, my advise is focused towards Illinois matters.  It may also apply to other jurisdictions, but you would need to check with a local attorney. It is not to be construed as legal advise to a particular case. That being said: 

What Is Equitable Title?

Equitable title effectively confers a financial or "equitable" interest in a specific property. In other words, equitable titleholders derive indirect benefit from the property's appreciation in value. Although an equitable titleholder who lacks legal title can't reap a profit by transferring the property to another party, he or she can do so upon receiving proper legal title. If the value of the property in question rose during the intervening period, the equitable titleholder would keep the difference between the initial purchase price and final sale price. But to do so by "flipping" the property, legal title would need to be conveyed to that person. So in other words, an actual deed would need to conveyed naming that person the grantee. Then this person is on title and can do what he wants with the property. 

Hope that makes sense.