Seller Financing And Re-fi Ifrom LLC Question
I have a motivated seller (young couple) who is willing to consider some creative options. They have little equity and are current in their payments. They need to relocate soon.
Their mortgage is not the greatest and the monthly PITI is equal to or maybe a little higher than market rents in the area.
I've spoken with them about doing a subto deal but the young woman's father is a realtor who is advising them against that.
However, they are willing to offer 100% seller financing. I guess that would take the form of an AITD or wrap-around mortgage.
I'm thinking of offering them market value for the house but structuring the promissory note so that I pay about $200 less than the current rental rate for 1 year. That would give me a little cash-flow. They would have to pay their mortgagee that $200 out of their pockets.
I would look to re-fi within that year and cash them out. If I can get a 90-100% LTV on the re-fi and go interest-only, I can then rent or L/O and improve my cash flow even more.
Two questions:
1) Any suggestions on how to structure this better?
2) I'd like to do this within my LLC but am unsure how I would swing the re-fi. What are the challenges in getting a re-fi from within an LLC?
...bump...
I don't advocate buying properties without obtaining the deed. I've done it before and it has cost me greatly.
You have potential flaws with your current owner financing arrangement:
1. The current homeowner must take $200 out of their pocket each month to pay the mortgage. What if they stop paying???
2. You also have no way to guarantee the quality of the title. Sure you can do your title search now but there is not a good way to prevent the owner from taking out another mortgage or having IRS liens against the property, for example.
I would probably pass on the deal. A lesson learned early on is that even if you find a no money down deal, if you can't make money on it it isn't worth buying!
You may consider buying the property sub2 and selling it on land contract or lease option. This should likely bring in a higher montly spread which may help you to break even with cash flow.
I'm still confident with the information you have provided me that your time and money is better spent on another project.
Thanks myfrogger.
Some more questions...
Why woudn't I have the deed? I thought that with an AITD I would receive the deed, record it and record a second mortgage.
I agree about the risk of the seller not paying their $200. However, I'm only asking them to do that for the first year. If all goes as planned, I would re-fi and cash them out within 6-12 months.
THanks for the input so far.