Seller Financed BRRR Strategy. Is this scenario possible?!?!

[Ethan G Stine]

Hey BP, 

So I recently opened escrow on a property that I was able to secure seller financing on. The financing and numbers are structured like this: 

ARV: 250k Purchase Price: 210k Estimated Repairs: 10k-15k. Avg. Rent: $1400 Seller wants $1000/mo for 5 years, ballon payment at the end of 5 years. 5% interest.

So with that being said, the numbers are not out of this world good, but it was something I was able to get owner financed so I jumped at it. My question(s) is, would I be able to BRRR this property? I would like to keep the property as a rental as it is in a very desirable neighborhood in my area. Would I be able to fix this property up, rent it out, then refinance it out at 75% LTV to get my money out and keep the seller financed loan as well as the refinance loan, or is that not possible? In my naive real estate head it seems very risky, even if it is possible. So then I would have $187,500 loan from the bank, and my loan with the seller at $1000/mo due at the end of 5 years, which when I run the loan amortization calculator I will have $150,000 due at the end of those 5 years.

If this is not possible, I plan to hold on the the seller financed loan for the duration of the 5 years since I will be able to cash flow during that time. Although, I am open to all advice and suggestions!

I know this is a stretch and the more I think about it, does not seem possible, but thought I would as the oh so helpful BP community. Thank you ahead of time!

Ethan

[Victor Steffen]

No disclaimer needed. If you can't discuss these things here then where can you??

IF the property does cash flow, and I say "if" because 1000/month debt service only leaves 400 to cover things like insurance, vacancy, management, maintenance, taxes, utilities, and capex... THEN it sounds like you have a good deal on your hands with the seller financing at face value. In an ideal world you will own a cash flowing asset and be able refinance into a conventional mortgage after 5 years, and 75% of the equity in the property will cover the balloon.