Best way to do this transaction

Have a deal in the works, trying to find the best way to complete the transaction.

We are going to purchase a property and then immediatly flip it to a buyer.

We have a low income buyer who has qualified for a great loan program. However the home she wants to purchase needs $2000 in repairs, and she doesn’t have the money right now.

She doesn’t have $2000 to put into the house, and the loan program will only fund her the cost of the house and won’t allow her to pull out equity.

So we are going to purchase the house and resell it to her and then split the equity.

How should we structure this deal? Any ideas?

Be careful. If you buy it, fix it and then try to “re-sell” it to her lender may not allow it. Especially if you are trying to take equity out and split it with her.

Hopefully someone else has a good strategy for what you are trying to do, red flags go up for me.

Assuming the buyer can make the monthly payments, but does not have more than 3% for a downpayment.

Buy the house and make the repairs out of your pocket. Now sell the house to your buyer on a contract for deed for 3% down, at a price about 10% - 15% higher than your cost basis, at an interest rate about 2% points higher than your underlying loan rate, and set the term for 24 months.

Hopefully, your buyer will be able to do a rate and term refinance in 24 months and roll in closing costs so she can come to the settlement table with nothing down, nothing out of pocket.

For example, assume that your puchase price plus repairs come to $100K. You financed the purchase with an $80K loan at 6.5% for 30 years. Sell the property on a 24 month contract for deed for $115K. The buyer gives you $3500 down and you “finance” $111,500 at 8% to 8.5%, on a 30-year amortization, balloon in 24 months.