Check out my Business Plan idea! Feedback Wanted!!

[Eric Moore]

So I'm in San Antonio (SA) and am currently doing a rehab.  I originally was going to wholesale it and advertised it online but decided to partner with a seasoned SA real estate investor.  Well a lady called me and asked was it still for sale and I had to let her know it wasn't because we are rehabbing it.  She then proceeded to tell me that she was looking for an owner financed property and had $25K to put down. I was shocked by the amount she had down and wished she would have contacted me prior to me agreeing to partner and do this rehab.  I know owner financing is hot in SA.  Then it hit me...  What if I did the following:

- Target properties under $100K

- Use investor's IRAs to buy properties cash (that would avoid Sub 2 risks)

- Pay them 8% ROI

- Place their note in first position

- Do a WRAP with a 10% note and I'll be in second position

- I'll keep the down payments made by the buyer

- Once the investor's note is paid off, I'll get the full value of the note until I'm paid off

Example:  Use investor capital to buy a house worth $50K.  Do light rehabs/cosmetic upgrades (if needed) and sell it via owner financing for $75K and require, let's say a $15K down payment (I know folks that are doing that right now that don't do any repairs).  Investors note $50K at 15 years at 8% interest would be $477.83 monthly (principal and interest).  My note will be $60K at 25 years at 10% interest which will be $545.22 monthly.  Total interest paid to the investors and I would be $103,566.21

I made $10K putting the deal together, cash flowed $65 a month for 15 years, then $545 for the remaining 10 years, and it's much cleaner then doing a Sub2 deal.

Contingency:  Have 3 months saved in case we have to evict the tenant and cover the mortgage payments.  Have an attorney and all legal documentation in order.

[Jon Holdman]

You only avoid sub to risks if the investor making the loan agrees. I, for one, would not. Nor would I make a 15 year, 8% loan out of my IRA. Maybe you can find folks who will, but that's a long time to have money tied up.