Seller finance and then flip?

[Ian Ray]

A partner and I are currently evaluating a property that we think is a great opportunity (at the right price of course) for us to fix and flip. Originally, we were thinking come in with cash to purchase, rehab, and then move the property.  Now, I am wondering if it wouldn't be smarter to attempt to secure the property with a portion of the cash we have available, negotiate seller financing (the couple trying to sell the house has held it for 2 years with ZERO income from it), rehab it, rent it out, and then sell as a turnkey.  

What is the consensus on this?

[Jesse T.]

Originally posted by @Ian Ray:

Originally posted by @Jesse T.:

If you have the cash for renovations, seller financing for a flip can be a good option.  It should be cheaper and give you a longer time frame than a hard money loan.

It looks like this property won't work as a rental, for whatever reason.  Have the owners been trying to rent it out for the whole time?  

 No, they actually haven't tried to rent it out at all.  They purchased it to rehab themselves, with their son as the primary worker.  The son moved after they completed the gutting and framing and the house hasn't been touched since.  As it is not habitable, and still needs a lot of work (wiring, insulation, sheet rock, etc), so they have not had much luck at the price point they were trying to sell at.  Interest dropped sharply due to the husbands intractability.  Now, due to being tired of holding it, the couple have become more open to finding the best way to move the property. 

I think it would be a great rental once it is done.  It is about 6 blocks from the local university. 

At a good price - if you have cash for the repairs, this could be a great deal with seller financing.  I would aim for a balloon or interest only for 2 to 3 years at a low interest rate(use the IRS mid-term rate). 

Ideally you could establish some rental history with the original financing to make it easy to get standard investor financing.

In some scenarios a joint venture may be a possibility, but this doesn't look like a good case for it.