Purchase Money Mortgage and Construction Loan

[Matthew Harper]

Hi All,

I'm a brand spanking new BiggerPocketer from Birmingham, AL (haven't even introduced myself yet!).  I'm just about as new to investing as I am the site.

I have just begun working with a seasoned partner in the area and we are in discussions with a property owner that inherited a run down home in a very lucrative rebuild area.

The owner is trying to avoid capital gains or estate taxes, and we have discussed a possible 1031 exchange with him, but he is nowhere near knowing what he would want in exchange, so we are avoiding that plan for now.

What we want to do is submit an offer with the intent of it becoming a purchase money mortgage, giving the seller 10-15% on his loan of perhaps 12-14 months for completion, so that we can use the mortgage to obtain a new construction loan on the lot.

What issues may arise from this type of situation?  And as I prepare an offer package, how can I show statistically how this will benefit him  in the long run over other options such as renovation or selling as is and listing?

Thanks all,