Owner finance for 6 months then Refi - Is this strategy valid?

[Samuel Hall]

I've spent all day on the phone with lenders (9am-2pm) and may have found an acquisition strategy that will work. I plan on buying 2-4plexes. According to the banks I would have to put 25% of the purchase price as a down payment. I may be able to do that. once. My goal is to have repeatable success. However if I were to get title to the property through owner financing I would be able to refinance the property up to 75 percent of the appraised value, using my equity as the "down payment." I would also be able to wrap origination fees into the loan and make my out of pocket costs $0. I stated this scenario to a lender and they said it was feasible. 

Here is my plan, let me know if my logic is flawed or if I am missing an important component:

- Make an offer of 70% of ARV minus construction costs.

- Convince the seller to agree to a 6 months owner carry (lenders require a 6 months "seasoning" before I can refi) 

- perform rehab, get tenants in place and get the place cash flowing

- After 6 months refi. bank orders the appraisal.

- I would provide income data and before-after pictures to convince the appraiser of the forced appreciation. 

- With the increased value I use the %30 equity as the "down payment" and wrap fees into the loan. 

- Pay Seller financing note off

- If there is enough meat in the deal I would pull equity out to finance the next rehab.

- Rinse and repeat for the next deal. 

Thanks for your attention.