Help with being creative with a deal?

[Danny Cerecedes]

Hi BP!

So I need some help or advice with a deal. My in laws are renting a house that they used to own 20 years ago. My father in law built the house and hit some hard financial times years ago with his plumbing business when the market went south. The person who bought the house from them became a good family friend and has charged my in laws a well below market rent all these years. He now wants to sell the property and I was able to negotiate with him to sell it to us. He is giving us a tremendous deal and opportunity. I’m saying we since I will have to be a part of the deal to help my in laws get the house back. So here’s the deal in a nutshell.

Agreed Sale Price- $750,000 ( we will be giving the seller $100K cash to sweeten the deal for him for tax purposes. So on paper the sale Price will be $650,000. 

I ran comps and in its current condition the house would easily appraise for $900,000-$950,000. With $75,000-$100K worth of work the house could easily sell for $1,200,000 plus.

This house is in a very desirable part of Glendale Ca.

The problem is the seller would like the deal done quick. I was thinking of trying to get a short term Hard Money loan that would cover the purchase and rehab. By doing this we pay off the current owner plus add value and then have the property refinanced into a 30 year fixed. I'm conservatively thinking post rehab we would have $350,000 plus of equity. The problem is that I only have experience doing 1 Flip so I'm not a desirable client to a Hard Money lender that would possibly lend at an ARV.

I’ve been wrapping my head around this trying to figure out how I can make it work. My father in law doesn’t have a lot of W2 income that’s why I and possibly 1 other person may need to be on the loan.

Any suggestions or advice would be greatly appreciated. 

Thanks in advance....hopefully I explained it clearly.

[Brent Coombs]

Originally posted by @Danny Cerecedes:

Brent thanks for the reply. My father in law has a small piece of property that is paid off and he is going to pull money out on it to pay the seller the $100K.

We are getting the house for $650,000. The seller knows it’s worth much more but he wants my in laws to have the house thus the sales price. To me it’s better to get it at that price then the true value it it we’re to hit the market (probably $900K plus). There would be instant equity in the property at a purchase price of $650,000. The reason for me thinking Hard Money is because the seller wants a quick close because of his current situation otherwise he will try and find a cash buyer.

Not trying to do anything shady and business is conducted legitimately. I’m just trying to get the deal done with the current seller and then we can worry about getting proper financing on it.

Hopefully that makes more sense. Don’t think I explained well.

You just wrote: "We are getting the house for $650,000", but, in your original post, you added: (also?) "we will be giving the seller $100K cash to sweeten the deal for him dot dot dot, dot dot dot. So on paper the sale Price will be $650,000"!

Which is it?...