How Can I make this Owner Finance Deal Work?

[Nixon Vayupak]

Need some input on this property with an "Owner Finance Opportunity". ARV is about $570K. The house is built in 1969 and comes with 5 bed and 3 bath with a total 1825 sq ft, pool, attached garage. The estimated repair cost includes Pool and HVAC comes out to $70K. Submitted offer at 400K and owner did not say no. But she indicated that she does not want to get all of the money up front to avoid tax and would rather owner finance the entire deal. So she then said, how much more am I willing to pay if she completely finance the deal. This is a curve ball for me.

So I was thinking along the concept of "Owner Carries the Loan". We would create a mortgage note (Deed of Trust) and she will be in first position and have escrow hold the deed until it is paid off. I've been told if the seller wants a higher price that the terms should be very favorable in the loan for buyer. So I was thinking $420K with a 4% 30 years amortize loan, so is this ideal or am I thinking the wrong way.

Please note I also checked the local average rent in the area and it pays about $2300 a month. Please provide your suggestions and any tips on a proper exit strategy.

[Jon Holdman]

What's your plan for this place?  Clearly $2300 a month in rent with a purchase+rehab north of $470K is going to make you seriously cash flow negative if you hold this place.  OTOH, if you're doing a fix and flip she's going to get paid off when you sell, unless the new buyer signs up for being financed by her.

$470K for a fix and flip with an ARV of $570K is an extremely thin deal. Normally that would result in zero profit. But with good financing you could squeak a small profit out of it.