Seller Financing a Wholeale Deal

[jrinvestments]

Good afternoon -

I am writing this post today to ask for some guidance and assistance on the following situation.

The deal that I have currently is a property that I am looking to wholesale for $39,000 to another investor. 

ARV: $80-$90k
Repairs: $15,000
Rental income: $750-$800 per month

Okay, that being said, I received an email today from a potential buyer asking if I would be interested in seller financing given the following:

He would be giving me $15,000 down and would be asking to have me finance the remaining balance of $24,000.  I assume I would build in an interest percentage on the $24k and divide that out over the 12-month period, but not sure? 

I have never done seller financing and was wondering if anyone out there could let me know 1) how it would work, and 2) how you would structure the deal in order to get the deal done.

Forgot to mention that this is an REO property and I will be needing to do a double close on setllement day.

Any advice is much appreciated.

[herbster]

And you're going to buy this REO for how much and all cash? Then you want to sell and ask for 15K down and 2K/mth for a year. Would you pay 2K/mth for a 39K house? Herbster

[jrinvestments]

We are buying from the bank for $30,000.  I will have a transcation funding fee of approx $2495 that will come out of my profit from the 2nd transaction. 

I didn't ask for the $15k down, my buyer stated he would give me 15k and then want to finance the rest with me. 

I got the $2,200 per month from adding 10% interest onto the $24,000 balance that he would be financing. 

We need to make some kind of interest from the money we are floating out there right?

How would you do this deal?

[herbster]

Sorry for being a little blunt on the first reply but you need to buy the REO using the trans funder and then flip it to your buyer. I guess the method proposed to you would work but I'd find a cash buyer and be done with it. There are a lot of blanks in this reply but read the forum and you'll know what to fill in. Herbster

[shuakym]

Try this scnario; Get a Partner to finance the additional 15K increase the price to the buyer to 46k  (opportunity cost,  you are carrying finance) then hold the paper o 30K for three months renewable to six. charge 15 percent plus 3 points up front.

Good Luck

[jrinvestments]

I may have been a little confusing in my original post so wanted to clarify a bit here.

We will be buying the property from the bank for $30,000 in Cash.  I was then planning on doing a close with another cash buyer/investor the same day for $39,000. 

Then I had a buyer ask me if we would be interested in selling to him under the following terms:

Deposit amnt: $15,000
Remaining balance: $39k-$15k = $24,000

Now he would want us to finance the remaining balance. 

The items he did not specify and that we looking into are as follows:

> Term (how many months should we finance for: 6 or 12 months)
> What interest rate should we charge for carrying the financing?
> Any other info that would be helpful


Thanks again.

[herbster]

Keep this in mind. Check your States Usury Laws, 15% could be to high and in violation of such laws.
I understand your offer received but I would still prefer a cash buyer. With a 9K spread minus all the fee's doesn't leave you to much. Herbster

[billclair]

I agree $9,000 spread minus fees isn't worth it, especially if you plan to buy it. If you just plan to control it with a contract I think a $2k spread is worth it. But buying it then selling it could sitll be worth it but definitely not worth the risk

[ReCoachDennis]

Actually, if the house is worth $80k and you can get it for under $30k why would you not be able to simply do the double close with a cash buyer? That's the best way to do it.

I would not stay in this deal and owner finance.

I would do this:
Have my buyer come up with the cash or loan to buy at closing.
Get your $9k up front at closing, and then take a 2nd mortgage on the remainder at a reasonable interest rate.

Keep it simple and don't get caught in the middle where you're owner financing and then having to foreclose.

If the deal is good, you should be able to find several buyers for this. If not, reanalyze this deal.

Dennis