Seller Financing Rehab

[Michael Merritt]

I have a motivated seller that I want to buy their property for 90k which is what they owe, he wants more but not sure how much. The house needs 20k in work and will resale for 145k with 2 months on the market, maybe a bit longer this time of year. The house is in decent condition, it was a hoarders house and mostly just needs a lot of cleaning, paint and landscaping and an electrical box.

The margins aren't wide enough for me to offer him any more than 90k but I was thinking of suggesting a creative solution such as the following. Also, I have done a few traditional wholesale deals but never a rehab or creative financing deal, so I'd love some opinions here. 

Mr. Seller, what if you offer seller financing to me, I take over the mortgage payment while I rehab your house. No down payment and no interest on payments. I list it with an agent and whatever profits there are between total cost of everything (90k+repairs+monthly payments) and the final sale price I give you 20%. If I don't sell, I can now get a traditional loan on the house and buy it myself (for 90k?).

This would save me from spending any fees on hard money (about 7k). Motivate him to sell it to me for a price I want and get me into a first easy looking flip. 

What things do I need to be aware of to write something like this up? How do I protect my investment into the rehab as far as owning title, etc? 

[Percy N.]

@Michael Merritt,

     A "subject-to" deal means you are effectively buying the property, provided the seller keeps the mortgage in place and you will continue to make his/her payments.

      Assuming the numbers work, it is lower risk for you.

      Do a search for "subject-to" on BP and you will get lots of posts and maybe even a sample contract. I know there was a podcast where this was discussed extensively.