Use of Credit

Been approached with this deal, I go out an get qualified and buy 4 properties (or more) from this real estate company. At closing, they turn around and buy the 4 back from me on a contract for deed, 3 year balloon. Monthly payment terms are the same as mine with the bank. They are offering $2,500 up front and $5,000 on the back end for “use” of my credit. These are single family rentals. Through use of other fees at closing, I don’t have to come up with down payment, they make it for me, or give it to me at closing and I give it back on buyback. Basically, under their program I buy all of these properties with my own financing but do not come out of pocket for anything.

Looking to get others opinions?

Also, (been doing some research) Isn’t this basically a wraparound mortgage? If so, doesn’t this basically mean I can’t do installment sale and have to pick-up the whole $7,500 in year one? Also, at what point do I become a dealer. I have regular full-time employment, as does my wife, we are looking at doing 10 in total.

Just trying to get my arms around this before moving ahead.


well, figured out the wraparound mortgage issue and really a mute point since my basis equals underlying morgtgage. Technically, is a wraparound mortgage but the IRS considers it not, at least with what I read, as I am basically acting as a bank since payment terms are identical. I think I am okay on the business argument and being able to use installment sale.