wholesaling with a twist!!

[Dustin Allen]

Hi all!
I am currently looking for cash flow as my main objective. Im in the process of buying a few 4plexes at this time, but i really am shooting for buying owc and selling owc. No liability, no headaches, just cash flow. However right now thats hard to do with low equity etc. So I came up with an idea on how to use a wholesaling theory with a twist on it:

A 1800 sq ft house worth $135k. offer 90k cash via hml and i might have to throw in $10k or so for the ltv. I would close on the house, and immediately refi rate/terms with a conv lender @ close. In the mean time (in my 20 days dd) find a buyer and sell it as a wrap around mortgage. Of course have new owner set up as a land trust so there would be no "due on sale" issues.

btw I have A+ credit and I can show money in the bank

Am i missing something? what hml/private program could possibly work in this scenario?? Would i be able to get a conv loan? Can you guys help me with this

[Bryan Hancock]

Problems:

1. The conventional loan will be hard to get because the lender won't count what you think is equity. There are generally 9-12 month seasoning requirements to count the improved value...at a minimum...banks are crazy right now

2. You aren't getting around the due-on-sale clause. When you put something in a trust and convey beneficial interest it still triggers the due-on-sale clause even though it likely won't be enforced. This is okay with the first one of these deals, but how are you going to spin it when you apply for the 2nd conventional loan?

3. You will have to get investment loans, which will carry higher rates and higher down payment requirements. Since the lender won't count the equity you think you have inside of a year this will require cash out of your pocket

4. With a lot of these you can be assured that some of your wrap buyers will default, especially in this economy. If you do something similar to what you described you need to be VERY choosy with who you put in the property, which will increase holding expenses

5. I suspect that transaction costs will eat through a lot of your profit for the deal with so many closings

Depending on how this set up it could arguably be mortgage fraud too since you are not intending to utilize the loan for the purpose you give the bank. I would suggest you ask an attorney about that and seek the right loan product.