FSBO + Owner Financing fix and flip deal

[Kaylor Bankler]

Hi everyone, I've been looking for my next fix and flip project for a few months now, have made a few offers, and have been getting beat by all-cash offers. Knowing I can't compete with these cash offers and from reading thousands of posts & replies on BP I realized I needed to get creative to put a deal together in this environment. Through hundreds of cold calls, I have finally found an off-market property that the seller is willing to do seller financing on, and we have been able to verbally agree on terms as of today. I'm confident that the #'s work, but there are a lot of elements to the deal that I have no experience with, and I would really appreciate any advice/guidance/suggestions you can offer. 

I'll try to paint a complete picture of the situation, but please let me know if there is anything else I should add. I have read a lot about these concepts separately and have seen a few posts that mention that people have done something similar to this in the past, I just haven't found much detail on putting them all together. I plan on getting in touch with a RE lawyer next week, but I'm just trying to learn as much as possible before that. 

350k Purchase price, 5k down payment, 2k monthly interest-only payments over the term of the loan with a balloon payment of the 345k at the end of the 12-month term or when I sell the house once the rehab is complete. I'm going to use cash for the rehab and plan to put 50k into it, and ARV is 500k conservatively.

He owns the property free and clear, and there are no realtors involved. Is there anything in particular that stands out or that I should be cautious of? I would also appreciate any referrals for PA RE lawyers who deal a lot with FSBO + Owner financed + Fix and Flip. Thank you for reading

[Account Closed]

Kaylor, I would be the first to tell you that I'm not an expert when it comes to seller financing (and would welcome the feedback of others). However, the first question that hit me was 'how accurate is the ARV in this market?' Philly can be a finicky market as some price points are more active that others given the overall economy and increased rates currently. A formal appraisal would probably be needed here and a hard look at projected market trends 12 months from now.

Also, I would consider escrow. This will create a space for scheduled doc signings and house transferal as well as allowing time for inspections, home insurance, and making sure there are no issues with title. In fact, I would not proceed forward with this deal without escrow.

Finally, confirm the seller is free to finance the sale. You don't want to be surprised by a outstanding lien or mortgage on the property, a title search will help you vet this out. Make sure that reselling the property in the future will be relatively easy and have a lawyer look over any sort of contract before you sign it!

Wish you luck.