Go Creative Financing or Just Buy?

[Jared Emerick]

Hello,

Went to a home today with a very motivated seller. It seems the priorities at closing are that they would like some cash at closing (<$2,000), and if to make deal sweeter, will carry a note until final sale of home by me. 

I can't seem to get down to detail how I want to do this deal so I am reaching out to BP. 

Conservative Home Value: $48,000-$55,000 (could be more, the home is in a small town where comps are nearly impossible to find, This estimate is based on trulia, realtor, and zillow). 

Rehab needed: about $5,000. 

Mortage: $36,000 balance (terms: 30 years @ 4.5%; 28 years remaining, $377/mo is principal, interest, taxes, and insurance)

Other notes: the seller is ready to move because of a broken relationship and moving away for a job. Wants to close ASAP. The seller is ok with a "subject to existing financing" purchase (with some money at closing), or a straight buy (where I would have to use a HML.) The home will rent from $750-850/mo.

I guess it's tough to figure out how to buy this home because I am unclear about how I want to exit. Other area investors say 2/1s in the area are difficult to sell quickly, are are better as long term rentals here. But i would like to be able to cash out of the property in about 24 months ideally.

My thoughts: Assume the mortage, owner finance the property or lease option the property as an exit. This will cost me <$2,000 upfront to close the deal. And I would have the home around $43,000 (36,000 loan+2,000 at closing+/- $5,000 for light rehab)

Can anyone experienced with seller financing offer advice or would you offer suggestions on buying the home outright through hard money at 5 points/15%, interest only loan. 

Any thoughts and opinions are appreciated. Thank you very much.

[Daniel Francis]

I don't know why you would consider HM over Sub2. With Sub2 you are getting 4.5%. What advantage is there with the HM loan other than it will cost you points, be a high interest-only payment and put pressure on you to sell.

If you take it down Sub2, you can fix, rent it, sell it, whatever you want... no pressure to get rid of it, so if it doesn't sell... rent. 4.5% is practically free money! Take it!