Wanted to get some ideas on how to structure this deal. We typically purchase outright from seller then do the rehab and put on market when complete.
I have a opportunity to purchase a house from seller who really wants to sell to us…even brought up helping with finance.
The property is in great area, $400k house, he owes about 180k with payments around $1200 a month. The house needs about 30k in rehab and our purchase price will be $260k. He is okay with getting paid once we sell house…seems like a good owner finance opportunity but not sure how to structure the deal.
I would like to take advantage of his offer of help with financing as its will be much cheaper than my normal private money or hard money loans, just not sure how to structure.
Any help or suggestions appreciated.
The ‘structure’ is no different than what you normally do when you purchase a house, except the seller is the bank.
Otherwise, take title in a trust deed as you would with a bank.
The differences I guess would be the repayment terms; the interest rate, the amortization schedule, and the balloon date.
If you’re talking about taking over the seller’s existing loan ‘subject to,’ then you need several documents that give you power of attorney over the property, notifications to the lender about where to send the payments, and several other documents that keep the seller honest and out of your hair, and the property properly insured. I do these types of transactions, but it’s impossible to explain all those details here.
I would find an attorney that is familiar with taking taking title ‘subject to.’ It’ll probably cost you two or three thousand dollars, but it will keep you out of jail, keep you from having the loan called, and keep your profit margins intact.
Just for giggles, think “All Inclusive Trust Deed” or A.I.T.D.
As an aside, you can take title in a trust, create a second mortgage payable by the trust to the seller for his remaining equity, and for all practical matters, call it a day. ???
I agree with Javipa, you should definitely consult a real estate attorney.
I don’t know if the seller is trying to finance the entire thing or if he wants the loan paid first. However, If you’re okay with putting some money upfront, you could pay the loan balance of $180k then have the seller carry back a note for the remaining $80k. That would save you some interest on your private/hard money.
It really all depends on what you’re trying to do and what the seller is comfortable with.