OK, here is the deal (I’m in Houston, by the way). I have a property worth 125k, and a person who wants to purchase it with me carrying the note on a 3 year balloon. They have 5k down. How do I structure the deal where I comply with the law. Of course I have a mortgage on the property.
Thanks for any suggestions…
Matt
u need to consult an attorney in TX familiar with s2 and wraps. i take it this is s2 the exsiting loan? have them do the close for u too. too many what if’s and title co’s want u to buy title ins, and most do not think outside the box either. as long as u do a wrap and not a L/O or CFD u r complying with the law, as I have been advised 
i price the property at the 2yr future appraisal and only do the note for 2 yrs. the buyer is credit challenge right now. i am working with them help fix their credit too, and then lead them to one of my 3 brokers buds.
anyway, say the property values are increasing by 4% per yr. u can price the sales price at $135,200, amortize it at 30yrs. make sure buyer’s interest rate is higher than urs to make a nice margin over the 2 years. take the DP away, then figure what the balance of their loan will be at the end of 2 yrs and that is the payoff.
without knowing what ur loan bal and pmnt and int rate are i cannot give u specifics, however i am working on one right now that is like this:
current value $158,000
2 yr future value $177,465 (homes appraising about 4%/yr out here)
dp $10,000
their financed amount $167,465
thier pmt $1623 my pmt $1531, dif $92.80 x 24=$2227 extra profit staying in escrow accnt for duration of the note
their 2 yr bal at refi time $163,939
my loan bal at that time $144,274 at payoff
PAYDAY>>>>>> $19,665 (in 2 yrs) profit
add on the monthly margin $2227 additional profit
and the DP $10,000 (half goes to escrow for my house note)
in total i will have made $31,892
hope this helps. u do need to talk to an attorney though. TX is funky
Yes Tony is right, sort of depends on if you are free & Clear on the home or you have an existing debt.
Either way, they are only doing 4% down. Structure 2 separate notes
Now even if you have financing in place, you can pay off that financing if you were to do something like selling the first position note at closing. Then you can keep the 2nd position note and have the buyer pay you nice monthly income as passsive as passive gets. Then in 3 years you get a nice chunk of change larger than you would have gotten as you have earned interest.
the 4% is not the DP, it is the appraisal rate for a 1yr period. the DP should be whatever u think ur target market can produce. keep in mind that the house will sell itself and the prospective buyers will be sold on the terms themselves. we work with buyers that for whatever reason cannot get conventional financing. that is why they are comming to us. there are buyers out there that have the cash to put down but cannot get a bank loan for whatever reason.
i do not see the relevance of structuring 2 loans on an S2 sell side. remember this is not conventional financing.
Tony,
5K of 125 is 4%. So they have 4% down on the original posters comments.
Structure 2 notes because it allows you the flexibility to sell the first with a smaller discount if you needed to cash out and use that cash on another investment. A large jumbo first takes a deeper discount.
Yes this is creative financing which is why you are offering the seller financing in the first place. I use this method all the time as it allows me to sell so much faster and I can move on to the next property even faster.
OH!!! I gotcha now!! lol i was heading to bed when i typed that last nite!