Seller Financing out of a Hard Money Loan

[Frank Gallegos]

Long story short- I bought a condo with the intention to wholetail. Here are those numbers:

120k PP (Hard money loan)

3k Rehab

170k ARV

25k Projected Profit 

Now here's where the deal got hairy... I put this on the market quickly and had a retail buyer lined up for it on a 50% down conventional loan, but financing fell through due to underwriting rejecting the HOA docs (deferred maintenance and financials) and I'm not sure if any lender is going to be able to finance this to be honest. It will most likely have to be a cash deal.

I went BOM and got offered 25-50% down seller financing with 7-9% int rate. This got me thinking creatively. What if I could get a private loan to pay off my HML, secure the private loan to the condo, and wrap the note to the retail buyer and pocket the 25%-50% down, get the terms to where I cash flow and put a 3-5 year balloon as my exit?

The numbers on this would be something like:

120k Private loan

0% down

6% interest over 30 years

$719.46 monthly installment

--------------------WRAP TO END BUYER------------------------

175k PP

25% down ($43,750)

9% interest over 30 years

5 year balloon

$1056.07 monthly installments

I'd pocket way more than if I were to sell it and I'd be getting cash flow at the same time. I could even have flexibilty of giving the PML a down payment using the down payment from the end buyer.

Am I missing anything here? Is this doable? Or should I just fish for a cash offer and call it a day?

THEN THERE'S OPTION 2

Do I even need a private loan to pay off my HML? The agent told me the buyer can pay 140k cash. That definitely won't work because I'll be at a loss 5k. So what if she gave me 145-150k, I pay off the HML with that and I carry a 30k note for 5 years? Won't have a big payday up front but I can cashflow at least $500 monthly for 5 years…

I like the numbers on option one best. But, option 2 I won't need to seek PM.

Thoughts?