BRRR Issues - Land Contract Refi Options?

[Michael R.]

Hello All,

I purchased an SFR last August from one of my coworkers using seller financing with the original intention of flipping it. This was his mom's home which was owned in a trust, and they decided to use a land contract as the vehicle by which I will pay him back. The terms are: 5 year balloon, 20 year amortization, at 6% with 10% down.

After a month or so I decided that I'd much rather keep the home since it's in a very desirable area and would rent for a good bit of money.  I purchased the home for $78k and put about $5k into it in paint, appliances, and repairs before renting it out last month for $1425.  Now that I have some tenants in there and 6 months had passed, it was time to look into refinancing.

One of the guys in my local REIA owns a mortgage company and started the ball rolling on the refi. It never occurred to me that the land contract would cause any hang-ups in the refi process and we made it all the way to a week out from closing before it came up. The home appraised for $180k and i was attempting to open a new loan at $105K, take some cash out, and roll it into the next project while sustaining a desirable amount of cash flow and not over leveraging the property.

Well, needless to say, we're at a standstill since there's a 12 month seasoning period for land contracts at which point i can only take out a small amount of money (my very minimal rehab costs if I'm not mistaken?).

Does anyone have some advice on how I might be able to restructure the deal with the seller to navigate around this situation?  Scrap the land contract and use something else?  If i wait the 12 months and rates go to 5%+ does it still make sense to do the refi with closing costs and everything else?  

Thanks