Can an investor group I am in wholesale to myself?

[Gary Miller]

Hi all,

I need some advice regarding a deal for what would possibly be my primary residence and first deal.

First some background. I moved in to rental in NJ 7 months ago and I am in a fairly unique situation where my landlord has become a mentor of sorts. He owns several rental properties in the area, co-ordinates a local group of investors and is a licensed RE agent.

After a couple of years organizing my personal finances and financial literacy, my goal this year is to finish the year in my own home and have 1 rental property.

I put an offer in on the rental I currently occupy, but came in under where my landlord (and 1 partner in this property) were looking at to even entertain giving up a cash flowing property. - He bought this 4br/2ba for 285k put 20k +/- in and I rent for 2700. I had the house independently appraised for 410k and offered 385k.

Now to the deal.

We looked at a very nice 4br 2 1/2 bath in my neighborhood listed at 420k. There is and executor of an estate as seller. I suggested to my landlord if I came in with 60k, we borrow from a hard money lender (in this case his group) and offer 300k to close in 2 weeks. We then wholesale it to me, I get a mortgage (I've been pre approved by several companies for 500k) for 400k and take possession as my primary residence, pay back the hard loan, (350 all in for 9 months) and split the difference.

I ran the numbers with 11% interest, 1.5 points, transfer tax and 6% agent fees( my landlord would represent from our side) for 345k and 5k for unforeseens.

The main thing I want to make sure is that this is legal.

As I see it, it is. The group gets a nice short term return, my landlord makes a share of that, agent fees and half of profit. I get 25k rolled into my mortgage for repairs right off the bat, which is a buffer in case of the seller countering or having to sweeten the deal.

The pros as I see it are

Good ROI for the group

Money made for my mentor

I get the house for 25k under list with the security of no other offers coming in and the possibility of 25k profit.

Any and all eyes and insights are welcomed.