You can’t avoid all risk when you use subject to or wraps, but you can limit your exposure by buying the correct way and having a reserve if things go south.

The other important factor to look at is the amount of reserve capital that the sponsor is raising.

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I highly recommend knowing what your rehab cost is going to be, add a reserve amount and make sure you know where those funds are coming from.

If I jump to the end of this story first, I will tell you that at 7% interest and high market values, very little cash flows well when you take into consideration principle, interest taxes, insurance, and a $100 maintenance reserve… at least where I live in Florida - but we have really high insurance rates.  

The more you can put down typically the better. you also though want to make sure you have enough money in reserves for rainy day - such as a hot water heater breaks or something.

Use Bank statement program, Use No Doc/Lite Doc/ 1 Year 1099 - or DSCR for (Investment only) Use Asset lending where you do not need a large deposit and the liquid reserves or assets acts as the collateral to offset risk.

We are a military family active duty to reserve and now looking to enter retirement years, so we see how beneficial it is to be close to the base and those amenities.

The way we look at it however is this sort of situation would be OK - but its a one time referral fee - any sort of arrangement with a long-term referral fee / borrower protection is reserved for true professional mortgage brokers - who like @Chris Seveney mentioned, would be doing more legwork on the deal vs. a simple and clean referral handoffvia CFPB on referral fees for business-purpose hard money loans:§ 1024.5 Coverage of RESPA.THIS VERSION IS THE CURRENT REGULATIONView all versions of this regulationSearch this regulationRegulation X(a) Applicability.

In your situation I’d at a minimum recommend a 6 month lease if you have reservations about the tenant.