Possible Owner Financing help and Deal Analysis.

[Seth Cunningham]

I have been looking into this for awhile now and running numbers on houses I see pop up. Looked at a good amount of houses, but have yet to pull the trigger on one.

Well I am going to look at a house today with my realtor that is FSBO that just had the tenants kicked out and carpet pulled up.

What I am trying to do is have an owner finance where I can put 0% down and use my cash for rehab to increase the value of the house.

The Facts I Know:

1985, laminate wood or old wood floors in living room and kitchen, carpet got pulled up from the rest of the house from what the seller has told us. 

1635 sq ft. on a 0.98 acre lot

Will find out more about condition today, but will need some upgrades in kitchen, new floors throughout, A/C system up to date, roof looks good when I did a walk around. Lots of DIY landscaping; High grass, pressure wash deck and fence, replacing some broke boards on fence.

Depending if I find anything alarming today, I am thinking ~10k, Most I want to spend is 15k for a rehab.

He is asking 149K (doing more research, but I think I can get it lower for what it is. I am having realtor get some more ARV comps one that would be a little nicer than what I would make it is 175K. Other houses that have sold that I know of without her are around that range also and similar appearance.

Mostly what I am looking for is info for the owner finance. He says he has a small loan left, will find out exact number today, and would be possibly willing to finance it. As I understand from what I read the best option for me would be a bond to deed and treat it as a regular loan through him. Then after I put in the repairs and let it season, would get it appraised and put in a conventional mortgage. Hopefully the market holds and if I can get the house for under 140K that will give me my 20% equity when I refinance.

What type of interest rate is typical with an owner financed loan?

If his existing mortgage is low, then is it worth the risk of the loan being called? If that happens, what is the worst that can happen to me if he can't write a check for it? I am assuming that is putting my rehab money I invested into it at risk, anything else and how would I salvage it if this happen.

Anything else to watch out for?

The initial numbers I have ran, assuming he will accept an offer to buy it for 130-135K, that would give me a decent amount of un-captured equity on the back end, and with rents for what would be improved to be around $1400 and assuming 4.75% (1% above current market) 

My cash ROI is 28%, cash flows $150-170 a month with estimated expenses( I want positive cash flow, but interested in equity capture so am acceptable with anything +$100) and Cash Flow / Mortgage is 124% with my doing my own property management.

My backup plan is a hard money lender that I am going to get in touch with after I have better numbers and pictures of the property to present him.

My last attempt would be to go to a private investor that I know. He would most likely give me a loan with no problem, except he is on the older side and has had issues recently, but is back in good health now, He normally writes his kids (spoiled 40 yrd olds that I do not trust) into the loan as their inheritance. Is this something that can be managed by the mortgage contract and if I plan on refinancing out after a year would it even matter as long as he resumes to stay healthy. I have not talked to a real estate attorney on this subject yet.

Any help appreciated on checking my numbers and financing, if you need more info and as I get more I will update.