My Property: Seller Finance instead of renting it?

[David de Luna]

One of my properties is nearly done with rehab. I was going to rent it instead of flipping this one. My realtor floated the idea to seller finance it. I'd get something like 10% down and sort of make up the rest as we agree. I can still refi my money out of it also for say, a 15 year term and do a seller finance deal for 15 years, or so I'm thinking. I get a chunk of cash from buyer, then another chunk from lender, recovering all I put into the deal and take amortized payments over the life of the loan. The down and all payment are non-refundable, I'd get a warranty deed to file in event of default so I don't have to deal with a foreclosure process. This takes all the landlord stuff off the table. No more operating expenses. With the down payment and refi, I've already recovered all my money in the deal. Then, over the life of the 15 year loan, I'd collect far and away more than I was going to make flipping it, which was why I had already decided to rent since I'd make more renting over time than a quick flip. If buyer defaults, I keep all the money collected and market it all over again. Or sell/rent it. Whatever.

If he prepays, it I prepay the mortgage I have on it with his prepay. The usual underwriting cannot apply. It's the skin in the game that should attract the serious. I would screen them as any other rental tenant, because, from a practical standpoint, that's what they are until they finish paying, excect that they are responsible for all operational expenses including taxes and insurance. I become a much more passive investor in this scenario.

Seems straightforward. Just wanted to post this to see if anyone can see what I am not seeing. What am I missing? What's wrong with this scenario?

A little background:

She knows many people with a TIN (not an SSN) or no SSN at all. They are hard-working wage-earners, maybe here legally, maybe not. They have families and are raising them in town in rentals, have money to buy, but banks won't lend to them. Strictly from an economic perspective, It's an underserved market, irrespective of one's political views on the topic. This person has lots of potential clients.