Seller Financing Wholesale SFR in Missouri

[Austin Faux]

So I got a potential deal that works because the owner is willing to seller financing.  The property is located in Springfield, Missouri.  I was originally approaching the deal as a straight cash deal and I would wholesale it, but the numbers don't work to cover her mortgage.  But she is willing to seller finance it as long as her monthly payments are taken over.  Here is what she is willing to do:

Monthly Payments: $850/m

Purchase Price: $88,000

Term: 72 months

Rents for homes a bit smaller in Springfield are going for $1,000/m and they're not rent to own.  I was thinking this deal might work as a sandwich lease option with a tenant/buyer at:

Monthly Payments: $1,200/m 

Sell Price: $92,995

Option Fee: $10,000

Term: 36 months

Proft (36 months): Rent: $12,600 / Sell: $4,995 / Option: $10,000 = $27,595

Profit (72 months): Rent: $25,200 / Sell: $4995 / Option: $20,000 (2 Renters) = $50,195

I was also thinking this deal might work as a "lease option" wholesale since I live in Colorado and it's out of state for me.  I would simply turn the deal over (minus the renter) for an assignment fee.  That other investor could then find the renter and charge them an upfront option fee that recoups my assignment fee upfront and gives them some additional money up front.

Let me know what you guys think!

Thanks,

Austin-

[Mitch Messer]

Hey @Austin Faux! Looks like a good deal, but note two things:

• Assuming you plan to credit the full option payment toward the purchase, you're double-counting the $10K in your profit. After 36 months, once tenant/buyer (T/B) is ready to close, their purchase price will be $82,995, not $92,995. In fact, if you spend the $10K long before closing, you'll actually have to come out of pocket $5K to close, so be careful.
• If you do get two T/Bs in succession, you should plan for at least a light rehab (paint, carpet) between them. After three years, the home will likely need it.

I agree with you, though: As an out-of-state operator, I would definitely wholesale this to a local investor. Your ability to create owner financing generates massive value out of thin air. Everyone can't do that, so investors will pay those wholesalers who can! Good luck!