Owner financing for fix and flip properties

[Angel Morales]

Hello everyone!

While listening to podcast #283 (which you should listen to in case you haven't), Paul mentions that when he wants to buy a house, he sends the homeowner a three-option letter of intent with the following options:

1. Cash offer (percent of what property is worth minus repairs, typically 50% of after repair value, this is the lowest value offer of the three that are given)
2. Owner financing (interest only, this is a higher offer)
3. Owner financing (principal only, no interest, this is the highest offer)

Option 1 is easy to understand, the ones I don't know how to apply are 2 and 3. Has any of you bought a property with the intention of flipping it using owner financing? What strategy did you use? 

We currently have two properties that we want to make an offer on, and it would be great if we could run the numbers and make an offer using owner financing as well.

thank you very much for your help!

[Teri Feeney Styers]

@Angel Morales I have purchased flips using owner carry terms  I gave them a 10-20% down payment at closing. I made interest only payments every month. Because they were flips I only asked for 1 year - so a "balloon" in one year. My strategy (which worked) was that I would have them fixed up and sold way before that one year was up. My back up plan was that I would force enough appreciation via my fixups that I would be able to get a loan for the balance owed plus most or all of my out of pocket expenses if I didn't have them sold by 1 year.