Seller Gives Back Reno Cost To Qualify Me For A Bridge Loan

[Robert Walden]

[Note:  this inquiry was originally posted under the "Creative Real Estate Financing - Toledo, Ohio" Forum category (under a related title), but without any response.]

I'm exploring a creative financing technique for a Fix-and-Hold where:

a. The Seller is paid his reduced asking price of $60,000. for a partially-renovated SFH, plus an additional $15,000. (the remaining renovation costs) for a total of $75,000.;

b. From the $75,000, he puts $15,000. (the reno budget) in an escrow account from which I alone can draw as needed to finish the renovation and add furnishings;

c. The ARV of the property (if rented to a single family) is $85,000. However, the income potential for a 3 Bdrm student rental with three independent leases is $2,550. per month (gross);

d. the $75,000. sales price, plus the increased ARV from student rent income is $120,000., which qualifies me for a bridge loan for the entire project. [Note: the minimum loan amount is $75,000.]

On paper, Kiavi (formerly Lending Home) indicates that the numbers qualify for a loan. And, my real estate attorney says its legal, as long as everything is clearly stipulated in the purchase agreement as to what's happening and where the money goes. He thinks the only sticking point might be that the lender may want me to have even more skin in the game than my $15,000. of "pre-paid" equity!?! Has anyone ever done a deal similar to this? My cash is in short supply and I don't have access to reliable PML at present. Otherwise, I'd simply buy the house outright, fix it and rent it. Any suggestions?

Thanks in advance for your input!    :-)