I have found a contractor/friend who would like to partner with me on some investments for rehab and resale. The deal would be, I take care of all financing/buying/materials, etc and he would do all the labor. After the sale we would split profits 50/50. My hope is to find junker properties I could get the seller to sit on for a couple months (2-6) until we had time to fix and sell the property - essentially seller finance with a moratorium on payments for up to a half year with a full payoff at sale or refinance. I have only bought a few properties and always used conventional financing in the past and don’t understand how to go about doing this if I find a willing seller. How do we arrange a contract/deal that keeps the seller from letting us do all the work and then backing out of the sale?
If you buy the property with owner finance you will get a deed and give the seller a note and deed of trust or a mortgage. If you own the property the seller can not back out. Where will you get the rehab money? Also the seller will probably not finance without getting some money or payments, especially if there is debt against the property that they have to pay on. I have seen a lot of deals work where you get a new loan fo rthe rehab and most of the owners equity and the seller also gets a second mortgage with no payments etc. There are ways to structure deals so that everyone involved gets what they want. Do not limit your self to just owner finance deals when you can get loans from banks and HML’s as well. I have found REO’s to be better deals these days and they usually will not finance.
Hope this helps some
Thanks, that does help. I’m looking for owner finance deals because I’m getting killed on out of pocket expense on the last two properties I’ve bought. I’m new to this, but to make a long story short, I trusted the first mortgage co I spoke to and got financially raped (about 6K in closing costs and a 7.85 int.rate with a second at 11%- I have excellent credit but got a deal like I was a major risk, apparently). My second place was 3K in closing with a 10% 4K down payment. Combined with about 6K in fixup, I’ve put almost 20K out of pocket and have very little left without digging into money I had intended not to touch. Now I’m trying to figure out a way to do a rehab to get some $ to buy more keepers, but I need to do it with little to no money out of pocket for the property and I’ll do all materials for fixup on credit cards. The contractor/friend I’ll be working with will do all labor with no draws until we can sell or get cash out of the property. at which time we’ll split proceeds 50/50. Any more guidance you can throw out will always be appreciated.
Just a comment;Same experience for me.I got a less than desireable rate arm for a prop.Financing.Good thing is it needs minimal cosmetics. Apparently my credit score went down mysteriously while waiting for underwriting.
finding a good lender or 2 that can meet your needs and be trusted is vital. Too many lenders, I have found, want to make as much money as possible on the deal in front of them at the moment - some are just not smart enough to realize how much more value a good repeat customer has. I’ve been messing w/ this for a while now and have still not settled all my lender issues.