Re: Paper and new sale to rehab investor...

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Posted by Michael Morrongiello on November 28, 2002 at 22:44:09:

In Reply to: Re: Paper and new sale to rehab investor... posted by JJ-Dallas on November 26, 2002 at 03:27:07:

JJ:
That someone that was telling you, that you can "create" a note on a property you don't own and then sell the property and resulting "paper" wasn't also trying to sell you something as well were they?

This technique while it sounds great, in reality will rarely close.

Tammy wants to sell her home badly. She will accept $50k cash for it. Her home all fixed up is really worth around $100K however the home needs about $10K to $15K worth of work. You come along and tell Tammy you can get her the $50K she needs. You now locate a rehab investor who will purchase this home from YOU (a home that you don't yet own) for $60K and you agree to owner finance the sale to this investor. You also hope to be able to sell this owner financed "paper" so that you can generate enough cash to get Tammy the $50K cash she needs and earn yourself a profit.

Could this work? Sure, maybe, but then where will the funds come for the renovations to the property? If the rehab investor can fund those renovations and upgrades on their own, then this might work. However the other issue that is very apparent here is the "seasoning of title ownership" issue. You are selling a home that you don't currently own for MORE than your acquisition price and all this is going to happen concurrently. This is where a lot of Note investors will have problems with this deal.

As a general rule, using owner financing instead of "hard money" type loans for properties that require rehabbing, renovations, etc. is not the best way to go. However using owner financing as BOTH a marketing and financing tool to quickly move ones inventory or one of these recentlyh renovated homes for resale, is a wonderful match.

To your success,
Michael Morrongiello

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