Buy w/ morgage flip to owner finance

[Matt Laird]

Is it possible to buy a property with a mortgage, rehab it to owner finance it to a buyer. Recoup a majority of the Down payment and charge a few points extra in interest, just to turn around and do it again with the Down payment?

Example "this is an actual property in my market I'm evaluating for a flip"

88,000 purchase 3/2 brick SFH mid 80s build

20% =17,600 down

70400, financed @ 3.5* 15yrs @ 503.28

Rehab $18,500 cash, total out of pocket $36,100

Sale for 140,000

20% = $28,000 down

112,000 owner financed @ 8* 30 yrs @ 821.82 p/month

Cash out of pocket at the end of the deal $8100.00

cash flow of $318.54 first 15 yrs with zero maintenance

only to increase to 821.82 there after.

Are my numbers out of line? what would be the worse case scenario on this deal? Thanks in advance for any suggestions..

[J. Martin]

@Matt Laird ,

I agree with @Jon Holdman , @Bill Gulley , and others that tell you to proceed with extreme caution, given Dodd-Frank. I work in bank regulation (although not much w/ residential compliance) - but there are enough rules, exceptions, unexceptions, and ways to run afoul, to make your head spin. I would add legal fees to your numbers make sure it is done right, if you decide to. Please don't just rely on advice from a BP forum, as great as a lot of the advice and ideas on here are.. (Thanks BP!)

There is also the issue of the due upon sale. I do not encourage people to take this route, and there was a recent podcast where this was discussed, which caused some furor in the forums. You should check it out if you haven't listed yet. Many will tell you that it is extremely rare for a bank to call a loan due and payable in these circumstances, which may be true, but doesn't make it right, and leaves you exposed to contingent liabilities.

Maybe in the future when interest rates are much much higher, I will start a hedge fund to buy up all the long-term fixed rate, lower-LTV loans that have had these transfers, buy them at a big discount because their fixed rates from 2008-2014 are so low relative to the future market, then call them all due and payable per the note. I can get back par very quick after buying at a discount, or negotiate the rate up a few points for not proceeding with foreclosure.. A bank would never due something like that I don't think, because of reputational and political risk. But a hedge fund would probably attract extra capital from wall street for being such a shrewd player..