Creative Financing - Opinions / Options Needed
Need some advice on a way to structure a creative finance deal... If it does not work I will likely try to buy it outright and a bit lower price and use Hard money....
1 Bed / 2 Bath Condo about 900sq ft - Can NOT rent out unless owned for 3 years
Ask: $225k (likely will try to contract for $215k) - place is in great shape. Needs some paint and a half bath update / Reno. Mechanicals are in good shape
ARV: $280k-$300k
~$74kish left on the mortgage - 6.75% interest about $890 monthly payment / HOA ~$200 a month / Insurance $35 a month / Taxes $355 per month / Tenant pays Water, Gas Heat. Market rent is about $1900.
To avoid having to pay hard money or private money my thought process is to do the following:
1. Pay her X amount to assist with relocation ("downpayment") - $10k
2. Take over existing mortgage only $890 / payment + HOA
3. Put a second mortgage in place on an amount we agree on (to be paid via balloon payment upon sale of the property)
-This amount would be the ask price, less the existing mortgage, less the downpayment and closing costs
4. Make the small cosmetic updates needed: $12k
5. As the new owner, list the property pay off existing mortgage, second mortgage and recoup the proceeds
My question is, would this be considered a novation and would an attorney or title company draw something like this up? I wrote this out pretty quickly so there may be some details missing / closing costs etc but looking for some feedback on what others have done or would do here.