Is the example below feasible? I working with “No Banks Required” in Atlanta in trying to get a note flip deal done and would appreciate any feedback on the example below.
My Purchase Price from seller 324,000
Owner/Occupant Purch Price 360,000
My offer is 90% of FMV to seller
Seller creates 90% Note 324,000
Seller sells note at closing(92%) 298,080
Buyer down payment of 10% 36,000
Cash on table 334,080
Seller’s Payoff on agreed price 324,000
My profit 9,080
The structure of the deal looks good, but the numbers don’t. There are very few note buyers out there that will purchase such a large note. If they do, I really can’t see them paying 92%, which you may have a couple points in there for yourself :-). I have been wrong before.
You may want to try to target homes in the $120K to $265K range. Several reasons why:
More note buyers in this range that will buy a 90% LTV first position note between 90-100% ITV. Buyer needs to be a good credit risk…no flakes.
In this range, buyers have fewer mortgage options. FHA, down-payment assist,MieMia, and other “low or no down” conforming programs are not available.
Properties tend to have more equity and are located in nicer neighborhoods.
Buyers in this price range expect to put down 5-20% and have the ability to do so. Better jobs, income, 401ks, relatives, etc.
Homes in this range (in my area) stay on the market longer. “Seller Financing” just may be the trick to sell these homes.
Low volume. Yes, there are fewer homes and buyers, but the payoff on these deals are hugh. I really like going after spec homes. After a couple years, the builder brings out a new model, making their other spec homes “obsolete.” Perfect for a flip.
These are just a few reason why I like to stay in the higher end (not the hightest) of the market.
So, I would say you are on the right track. I would, however, suggest focusing your marketing for the buyer rather than the property. There are a lot of buyers in need of a “stated income, no doc” loan. Strippers, business men, commission sales, drug dealers, etc. have the cash but don’t want to tell you how they acquire it.
Simultaneous closings and creative notes are one of the best ways to help these customers. Worst thing that can happen is that you do a “seller assist” instead of a flip. Go after the buyers.
James-IN
PS Atlanta is a different market, so my suggestions may not work
If you can find a buyer for the house that has a FICO of at least 681 you can do 95% LTV at 9.65%, no prepay, no ratios, no verifying income. But if they have that score they could get a standard mortgage near 7%. What is your buyer’s FICO.
Note Buyers will only go into a at 80%, not 90%.
If these people do your dealing with do, then email me details. I’d like to use em’ quick before they quit doing it.