All Forum Posts by: Sam DiNicola
Sam DiNicola has started 2 posts and replied 10 times.
Post: Advice needed on potential first fix & flip with seller financing
- Posts 10
- Votes 2
Quote from @Stepan Hedz:
Quote from @Sam DiNicola:
My neighbor is ready to sell his home. He is older and does not have a mortgage and there is a lot of deferred maintenance on the property. ARV $450k. Thinking of offering seller financing deal to him. Repair costs would be $150k. He is hoping to get $200k but current value of the home is more like $160-$170. We would likely take 2 years to rehab since this is our first one. But I'm not sure everything I need to consider when underwriting a seller financing fix and flip to see if this deal would even make sense. I tried the BP Fix & Flip calculator but it's not really geared toward seller financing. Would love any advice or insights. This could be a great opportunity but I'm not so eager that I would do it if the numbers don't make sense.
That could be a good opportunity, but underwriting of a seller-financed fix-and-flip deal requires careful analysis. For this being your first project and it being around two years, you want to underwrite in a way that minimizes your risk and maximizes your cash flow.
Key Considerations for Underwriting This Deal
1. Purchase Price & Seller Financing Terms
Your neighbor wants $200K, but the current value of the home is closer to $160K-$170K. With the deferred maintenance and your $150K rehab budget, offering $200K out of the gate would not make financial sense. You could structure the deal with seller financing to bridge the gap.
Possible offer structure:
-Purchase Price: $170K - closer to actual value
-Down Payment: Low or zero down to conserve cash
-Interest Rate: 3%-5% - or better yet, 0% if the seller will agree
-Monthly Payments: Interest-only or deferred until the sale
-Balloon Payment: Full payoff in two years when you sell
If he wants $200K, you can still make an offer of:
-$170K purchase price + $30K as a second lien due at closing
-Seller carries $170K at a low interest rate
He would feel closer to his number, but you still keep within reasonable investment limits.
2. All-In Costs & Profitability
-ARV: $450K
-Purchase Price (financed): $170K
-Repairs: $150K
-Holding Costs & Financing: ~$20K–$30K (insurance, taxes, utilities, interest, etc.)
-Selling Costs (Agent, Closing, etc.): ~$35K (assuming 8%)
Total Cost: ~$375K–$385K
Projected Profit: $65K–$75K before taxes
That is a decent margin, but this being a two-year project, you need to be sure the market doesn't shift downward, and that you have a buffer for unexpected costs.
3. Exit Strategy & Risks
-Market Volatility: You might have to hold longer or sell for less if the market goes down.
-Rehab Timeline: This is your first flip, so be prepared for some delays. You need to pad both time and cost contingencies.
-Seller Expectations: Ensure the seller knows and understands what to expect regarding terms and timeline-many sellers are unfamiliar with seller financing.
-Legal Protection: A real estate attorney should draft the seller financing agreement to make sure your interests are protected.
Final Thoughts
This might be a pretty awesome first project if you can work out some sort of low-down, seller-financed deal with sweet terms. If the seller is insisting on a high price with not-so-hot financing terms, though, this may be a riskier project than it's worth. Negotiate closer to $170K with creative financing is your best bet.
Thank you so much for the extremely detailed response! I really appreciate you taking the time to map all of that out.
Post: Advice needed on potential first fix & flip with seller financing
- Posts 10
- Votes 2
Quote from @Jaycee Greene:
Quote from @Sam DiNicola:
Yes! Look and finishes would be similar although lot is quite a bit longer on the property I'm looking at, about 3x the length of that property. We typically buy and hold but it would depend on the numbers for this project, we'd be open to either BRRR or fix and flip so there's a few possibilities. Running the numbers it does seem like they'd pencil out but definitely completely new territory for us.
@Sam DiNicola Got it. I have several CFO clients that do similar heavy rehab projects in the Midwest (albeit with a lower purchase price), so you can definitely make the numbers work.
If you did rent it out, what do you think would be the monthly rent be? $4,000?
Oh, and given the longer parcel length, does the city allow ADUs?
No, it would be more like $2,500 but an ADU is a definite possibility as there are many in the neighborhood already. We are ok with no or even slight negative cashflow since it would be a strong equity position for us if we hold it.
Post: Advice needed on potential first fix & flip with seller financing
- Posts 10
- Votes 2
Quote from @Jules Aton:
When I did a seller finance deal years ago on what would become a long term rental I bankrolled the rehab funds then re-financed when it was finished. Two years is a long time for rehab, did I read correctly?
Yes, we might end up doing it faster but I want to underwrite it with a longer timeline since this is our first one just to be safe and we would likely try to do some of the work ourselves to save on some demo and reno costs.
Post: Advice needed on potential first fix & flip with seller financing
- Posts 10
- Votes 2
Yes! Look and finishes would be similar although lot is quite a bit longer on the property I'm looking at, about 3x the length of that property. We typically buy and hold but it would depend on the numbers for this project, we'd be open to either BRRR or fix and flip so there's a few possibilities. Running the numbers it does seem like they'd pencil out but definitely completely new territory for us.
Post: Advice needed on potential first fix & flip with seller financing
- Posts 10
- Votes 2
We would likely do a cashout refi on our primary residence for rehab costs. We're open to BRRR or selling depending on the numbers. This would be our first full rehab and first time using creative financing so I want to make sure I'm underwriting it correctly before we make any moves!
Post: Advice needed on potential first fix & flip with seller financing
- Posts 10
- Votes 2
My neighbor is ready to sell his home. He is older and does not have a mortgage and there is a lot of deferred maintenance on the property. ARV $450k. Thinking of offering seller financing deal to him. Repair costs would be $150k. He is hoping to get $200k but current value of the home is more like $160-$170. We would likely take 2 years to rehab since this is our first one. But I'm not sure everything I need to consider when underwriting a seller financing fix and flip to see if this deal would even make sense. I tried the BP Fix & Flip calculator but it's not really geared toward seller financing. Would love any advice or insights. This could be a great opportunity but I'm not so eager that I would do it if the numbers don't make sense.
Post: Minimum Income & Credit Score for Prospective Tenants
- Posts 10
- Votes 2
@Charles Carillo and that wouldn't be a fair housing violation asking for more security deposit based on their credit score?
Post: Minimum Income & Credit Score for Prospective Tenants
- Posts 10
- Votes 2
Fair housing was what I was thinking of. I will check our local laws, thank you!
Post: Minimum Income & Credit Score for Prospective Tenants
- Posts 10
- Votes 2
@Charles Carillo thank you for this! If a tenant with lower credit, do you take a larger security deposit or instead require first month, last month rent, and one month security deposit?
Post: Minimum Income & Credit Score for Prospective Tenants
- Posts 10
- Votes 2
Does everyone require prospective tenants have 3x the rent in monthly income / rent is no more than 30% of their monthly income? What is minimum credit score you look for in a B- neighborhood? For people with lower than your minimum credit score, do you still have them apply to see more detailed credit check and give them the option to pay larger deposit or something to help protect yourself?