Seller-Financing / BRRRR Hybrid ~ Can I Do This?

Question

Greetings BP's Community!

I don't know how "innovative" this is or isn't, but I'm still working at my first property.  I have a property in need of renovation.  The seller is agreeable to do some form of seller-financing with me, and I'm agreeing to pay $105,000 for the property and flexible agreement.  I plan to do much of the work myself.  It's currently structured as a single-family, and I'll convert it to a duplex or triplex...renting out each unit as it is ready, and likely move into one too.  That's just some context.  I'm open to input/tips regarding any of this, but here is my main question right now:

CAN I DO THIS plan outlined below if the owner agrees, AND/OR is there a more financially-sensible approach?

Step One: I pay seller an agreed upon down payment (or do no-money down, if agreeable).

Step Two:  Record the promissory note that details arrangement for this seller-assist sale/purchase.  Property title is transferred to me.

Step Three:  Monthly payments are agreed to be delayed for 6-8 months while I bring the property back to Life (rehab).  I rent out a unit or two as they are ready, still with plans to move into the final unit once completed.

Step Four:  Once the property is restored, I take out a HELOC/equity loan to pay the seller the remaining due (likely ~$100,000).

Step Five: Property is renting, seller is paid, and rental income pays back the HELOC/equity loan + cash flow.

This seems to be a twist on BRRRR that includes seller-financing to get started and a HELOC/equity loan used to pay the seller (balloon payment) instead of a mortgage.

Am I missing anything?

Thanks for any and all constructive feedback!

John Winters · Answer

@Chris Seveney @Don Konipol

Chris and Don, good morning to you both -- and thank you both for confirming it can be done.  It's really helpful to be confident that the premise/approach is possible.

Also, I appreciate your questions for considerations, all great questions.  Honestly, I'm in contemplation of a few of them.  I'm considering two projects right now, this one and one that is much simpler to get started.  This one has more risk, but will set me up better for future projects/investments.

Chris, thank you for 'interest-only payment' idea.  I like that as a stronger offer. Also, if you don't mind, is there a specific place in the paperwork/process that the owner would defer interest?Don, thank you for the appraisal advice and reminder to put a value on my time and work.  My goal is, in exchange for my time and work, I have a place to live and financial means to spring into a second project.  This first one will just take longer to achieve that, is the plan.

In the end, capital for the renovation is my biggest concern right now.  Also, I may ask a 'structure guy' I know to do a walk-through with me to get some feedback on the extent of structural work.  It appears to be light work in that regard, but I would value a second opinion for that too.

Thanks again!

Chris Seveney · Answer

@John Winters

Yes it can be done if seller will defer internet - maybe also consider interest only payments during that time

Have you checked with your local zoning to confirm a single family can be converted into a duplex or triplex?

Doing this will still have considerable costs just in materials. Do you have the $ for that ?