Need Creative strategy for this project

[Michele Williams]

I know there is a deal in this scenario, I just am not quite sure how it looks. Here's the situation:

I have a once beautiful 1970s house in a great neighborhood in a beach area (Lewes, DE). Owner, who has his private residence just several doors down to the subject property, paid $250K in March 2015, and another $35K impact fee is owed as of April 2017 for installation of county septic and water. So owner is in the property for $285K. Problem is that house has been vacant for 2 years, and a tree fell on the roof, and was never fixed; therefore, mold, water damage, etc.  He wants to sell but also wants to recoup his initial investment. 

ARV $380K and rising. Repairs $125K. With traditional calculations, MAO is about $115-120K. This doesn't work for the seller.

I was thinking that the seller hold some of the note, and the end buyer bring the rest of the money to the table so that we (the rehab investors) can get costs and profit ($125K + $125K), the seller would still own the house (collateral on the note) but it is now fixed, and the end buyer gets a fantastic house. Everyone is happy. 

But the numbers don't add up. Using the logic above, the ARV would have to be $285K (the owner) + $125K (costs) + $125k (rehab investor profit) = $535K. Appreciation is happening fast, but not that fast.

Anyone out there have suggestions for another creative solution? Thanks in advance.

[Jason Dillard]

Us boys from South Carolina might use a little bit different mathematics. I used MAO plus her projected profit to guess at how much cash would come out. Don't forget that you'll need additional cash to remodel the property. This now could be a first mortgage on the house if need be. This cash that comes out of this transaction is not profit. In essence, the cash is owed to the house seller. However, now this cash can do more transactions. Oh yeah, for the seller to get his price I wouldn't be willing to pay interest or payments. He's paying out expenses now owning the house. Let's help him not have any expenses and get him the price he wants.

Why is it so hard to believe that an owner would rather have a first mortgage on a million-dollar property than on a house with a tree and on top of it?  I can create the paper against something that I own or control that this seller will approve.  Now you got to have somewhere to put this first mortgage, so if you don't have a bunch of equity you might need a partner.

Is it so hard to take $250,000 and over the next couple of years make more money with it?

Or maybe a better question would be: Who wants a 250k loan for five years that balloons at 280k with no payments?

Pick me pick me!

Sorry I didn't explain this well earlier. Sometimes I forget that since I do this all the time, I need to slow down and explain more thoroughly.  If y'all still don't understand it, just let me know.