Owner Financing Fix & Flip Question

[James Allen]

Hey BP,

Trying to wrap my head around this Owner Financing Fix and flip deal. I've never looked into to doing owner financing with a flip before. I have a few questions that maybe you guys can help me out with. 

1. What are typical lengths of deals done with owner financing with intent to flip. (ex. 12 month, 18 month, 3 year w/ balloon payment, etc.)  ??

2. Typically, If I were to pull this flip off in 6 months with a 18 month loan w/ balloon payment, will I be able to pay off the remainder of the loan after 6 months penalty free or do I have to make those payments for the whole 18 months no matter what? 

3. Is it typical to let the seller know your plans are to flip the property? 

4. In this deal, we're both using the same RE Agent. Does the agent draft the paperwork or would an attorney be more appropriate in this case? 

5. Is it important to make sure they have 100% equity to avoid wrap around mortgage complications such as potential due on sales clause, etc.? 

Thanks in advance!

[Account Closed]

@James Allen With Owner Financing specific to a Fix & Flip, the Owner gets paid off when the property sells, so it is somewhat open ended. It depends on how the Agreement is written up as to what payments you have to make. Normally you would be able to sell with no prepayment penalty regardless if you got it done the day after the ink dried. If the seller asks what you are going to do with the property, it might be appropriate to answer. They probably couldn't care less unless you make an issue of it. I would not use the same agent. If the agent brought you the opportunity they deserve to paid. If you found the property I wouldn't introduce an agent to the transaction. I would use a closing attorney instead. Any change in ownership (regardless of the amount of equity) can, but probably won't trigger the DOS. If you are concerned about DOS (I certainly am not in my transactions) then you might consider a Lease Option. However with a Lease Option any fixing you do to the property is not yours until you exercise the Option.