Updated about 11 years ago on .
Looking to wrap
I'm in negotiation w/ an out of state owner of a vacant but good condition house in the dfw area.
His asking price-128 owner finance, 4.3% @12 years and 12k down, he refuses to stretch out the term... that was the first term I negotiated on, he would only reduce interest rate.
Repairs-5k (viewing inside tomorrow for the first time, pictures look good, house was renovated in 2010)
ARV-160k
This property is owned free and clear according to the seller and all of the data that I've seen. So a wraparound would not be at risk of the due on sale clause. I'm thinking of selling to a buyer who has damaged or short credit history with an interest rate of around 7-9% at with a 10% down payment. I've been in talks with an owner finance mortgage originator over the deal and they think this neighborhood would support a 1500 piti at 30 years. The taxes are around 2900 and the insurance about 1000. If I sold at the arv of 160k I would be looking at 100-150 in cash flow for the first 12 years and about 1000-1100 for the years after my underlying loan is paid off. I would not have much of a down payment coming to me but it would likely cover my down payment. I may end up covering some closing that I won't recover with the 10% buyer down payment. I've been given 4 opinions on arv by the originator, 2 really good realtors and a hard money lender. I'm throwing out the highest and the lowest of 150k and 180k and going with the two in the middle who reached the same conclusion. 160-170 is all it's worth and all I'd be willing to owner finance for. My biggest risk is having to potentially foreclose on the end buyer. If I wrap I will only sell as is, as far as I can tell any money I spend would only be to make the house sell faster, not increase value.
I started negotiating this deal as a property that I would buy and lease to a tenant but the numbers don't look good with a 12 year. A refi is my out if that's what I do with it. I am also considering just listing it on the mls but it'd be kind of thin if I started finding more problems to spend money on. The seller wants me to complete the entire 12 year term if possible but I haven't disclosed exactly the method I would use (wrap). I have told him that no matter what I will not be occupying the property and that I'm looking into every potential way to make a profit, we agreed on no early payoff penalty of course.
If you've read all that then here's my question... Does anyone see any risk that I haven't addressed and would you personally take a deal like this? I've never done one of these and really need to put my mind to rest if I'm going to pull the trigger. I think I'd regret it if the house is as described and I pass. My hm lender said he'd loan on it at 90k and maybe more if it really doesn't need more than 5k so I may make a low cash offer as well.