Structuring Owner Finance deal with an a note sale exit strategy

[Michael Finkelshteyn]

There is a 3/1 property in Houston being wholesaled with the following information:

ARV: $50k

Repairs: $27k-30K

Rentals: $600-$750 ( I don't believe these numbers)

This deal doesn't make sense as a rental to me, but I was thinking if it would be possible to structure an owner financed deal to an owner occupant and then sell the note to a note buyer.

Below are some rudimentary calculations. I have not included holding costs for simplicity (HML+insurance+property taxes+utilities+etc.). This is more so an exercise and I'd like feedback on how notes are properly analyzed.

If possible, perhaps I could complete some "Lipstick" repairs for $15k-$20k.

[Bill Gulley]

I just used an 18-20% yield requirement, it's a new note with a questionable sale by an owner, questioning if the market value is true or based on the seller's ability to find a buyer and sell at that price.....more to market value assessment than to your opinion, nothing personal there.

The time to employ such strategies is when you have a buyer for the note at a known price. If you sell and finance and then look for a buyer, you can lose quickly in the market. If you have an investor that gives you a set of collateral parameters and loan qualification bench marks with a required yield then you can build that into the transaction so long as you don't exceed, by very much, the market value. Seller financing does not add value to real estate!

The largest new home builder in our area provides financing on sales and uses the notes, through sales or as collateral to acquire capital, I assisted them years ago in the concept and process.

You'll also need a broker for compliance issues and passing notes along to investors or in processing for collateral especially with a bank that may accept them. :)