Need opinion on analysis of a SubTo/SellerFinance to Wrap desl

[Paul Gomez]

I have been running some numbers on a deal that utilizes a hybrid SubTo/Seller Finance deal into a wrap around mortgage. Please follow along and be brutally honest with feedback.

Property: 

Motivated Seller Listing on MLS. Sale price $355,000. Can't sell house on open market due to comps being in nicer condition, high interest rate environment, house needs updates.

Underlying debt: 

$169,000 remaining principal. 2.8% interest rate, 240 month original term. -> Debt payment $1006 /month

Assumptions: 

-Seller is motivated and does not need proceeds from the sale of this house. 

-The house is overvalued by around $25k when comparing with MLS comps. Goal is to use this in negotiating seller finance terms if necessary.

-Initially, I would assume I could do the hybrid, sellfi portion of it at a 4.5% rate at 360 months

     ->Principal value: $169k 

     -> Delta between asking price and remining principal ($355k-169k=$185k) , at terms above -> $940 /month

-2% Seller agent fee  -> $7,100

-2% Closing cost -> $7,100

-Seller pays closing cost and commissions

-I pay attorney/title fee - $3000

Acquisition Strategy:

Offer full asking price -> $355k using hybrid terms

-SubTo remaining debt ->  $1006 /month

-Seller finance delta (from above assumptions) -> $940

Total Debt Service: $1946

Disposition Strategy:

-Sell home on wrapped mortgage, 360 months, 8%, $355k, 10% down ($319,500 principal)

     Payment  -> $2344 (local rental comps about $100-200 above this amount, so feels justified for 8% rate)

Profit:

Upfront cash from the deal => $ 35,500 down payment -$3000 attorney => $32,500

Cash flow => $397.51 per month => $4770 /year

Note a few assumptions were made here. 

Positives: Owner gets full asking price, no money down, cash upfront, cash flows, do not own the property so no rental management.

Caveats: No equity play, assuming seller would do 4.5% or less rate, assuming there is a buyer who will accept higher wrapped mortgage payment in this area. assumes seller does not need proceeds from sale of the house.

I know this is a long one, any thoughts? Does a subto deal always have to be an equity play or can you capitalize on the loan arbitrage between underlying debt and a wrapped mortgage? What am I missing that kills the deal?