How to structure renovation loan and seller financing for a fix and flip

[Anna Leung]

Hi, how should we structure a fix and flip where the seller (REO lender) is willing to do seller financing in exchange for higher price and we need to come up with substantial rehab cost? Very few lenders are willing to do rehab loan only, and if they do, they want the first lien position, which means the seller has to be in a junior position, which the seller probably is not willing to do.

Without seller financing, the offer would be $350k, rehab is $180k, and ARV is conservatively at $700k, interest carry and orig fee totals $56k, and RET/insurance/closing/commission totals $55k. So it will have $160k equity in and net out $58k profit. However, the $350k offer would not be competitive.

With seller financing, the offer is $400k, but total cost is offset by saving on interest carry and orig fee.  At the end of the day it will have $196k equity or loan in, and net $64k out, If it could be structured in a way that both the seller and lender are comfortable.  Keep in mind this is located in a high cost area, where $1 million home is everywhere.  

Of course we are also exploring HELOC on our primary residence, but for some reason, conventional lenders are not willing to underwrite my husband's stocks (RSU), which is a substantial part of his income. Any advice is highly appreciated.