flipping and seller financing - Posted by Patty

Posted by Marvin on February 23, 1999 at 21:35:48:


How long does it take your institutional buyer
to fund deals? And where do you live?


flipping and seller financing - Posted by Patty

Posted by Patty on February 21, 1999 at 19:17:09:

I recently saw a local advertisement from a buyer of notes suggesting that seller financing is a great alternative when used in conjunction with flipping properties. How does it work and how can I best utilize this option? Has anyone successfully tried it?


Re: flipping and seller financing - Posted by Lisa

Posted by Lisa on June 07, 1999 at 20:15:03:

I’ve noticed an increase over the past couple of years in distressed properties. How can I use this trend to begin flipping real estate? As a beginner, what steps should I take to get started flipping real estate?

Re: flipping and seller financing - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 22, 1999 at 13:57:49:

I would imagine this note buyer is speaking of retail flipping, not the wholesale flipping usually discussed on Newsgroup 1 (cash sales). The scenario I’m familiar with, is where you get a property under contract at a low price, then sell it to a retail buyer with 5% to 10% down, create a first note for 80% LTV, and a second note for the remaining amount. You then sell the first note at the closing table to the note buyer for 91% to 95%, and keep the second note for yourself. Supposedly, it’s easier to get C and D credit buyers into your properties using this method.
However, with mortgage loans being so easy to come by now, I would speak to a good mortgage broker about getting my buyers with poor credit a mortgage loan before I would consider trying to finance it myself using this method. Maybe it’s more useful when mortgage loans are harder to come by.


Re: flipping and seller financing - Posted by David Alexander

Posted by David Alexander on February 22, 1999 at 22:33:02:


your right except that if your selling at 91-95% your probably going through a broker. Sellng a note simultaneously is pretty much like doing a mortgage anyway except for not having to worry about ratios and you can say Owner Financing in the ad. However other avenues open up with Seasoned and portfolioed Notes.

I myself prefer to sell the houses first and start looking for the financing second after someone else is making the payments on the underlying loans.

David Alexander

Re: flipping and seller financing - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 23, 1999 at 13:03:49:

David, thanks for the feedback. Being able to include “Owner Financing” in the sales ad should generate more interest. Yes, I was speaking about selling the first to a broker, hence the 91% to 95% of face value. Can you sell the first note for a significantly smaller discount after the sale, when the note is seasoned? Is that why you take this approach? If so, for what discounts are you typically selling the notes?


Re: flipping and seller financing - Posted by Bud Branstetter

Posted by Bud Branstetter on February 23, 1999 at 14:52:26:


Yes you can flip a property using owner financing. The note buyers will buy the 80% first note at a return of 11.5 to 12%. If you structure properly you can sell at 100% of face value. These 91-95% of face value figures are to brokers that resell the note and make a healthy profit. The cost of the sale may include appraisals and title policy. This may be part of their expenses.

If you can finance long enough to let them accumulate a full 10% down with a payment history you can cash out more of the value of the property. That is why it is adviseable to review with a good mortgage broker. But then it does not become a true no money down flip. I don’t see anything wrong with advertising owner financing available. The circumstances of the buyer do more to determining the best route to collect the cash. The sellers desires can also overide any posibility. Having the knowledge to go the owner financed route and broker it yourself is only one more technique in your toolbox.

Re: flipping and seller financing - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 23, 1999 at 16:20:58:

Ah, yes, I see. As long as the yield is adequate, and the downpayment is acceptable to the note buyer, the discount on the 80% first would be very small or nothing. Avoiding the middle-man broker is key as well.

Thanks for the info.


Re: flipping and seller financing - Posted by Craig

Posted by Craig on February 23, 1999 at 17:54:42:


As far as institutional note buyers go, there are very few of them. Most require some sort of minimum discount from the note. 1% or .5% added yield above any interest rate. I just recently got in touch with one that buys par(no discount). They just recently started going up to 95% LTV/ITV. They require a 1% discount however, if you increase the interest rate by a quarter to half a point then they pay par. They will even allow you to increase it so they pay above par. I wouldn’t recommend selling a note for more than it’s face value though. Could land you in trouble if you’re not a licensed mortgage broker(assuming you need to be in your state). Sorry I’m not at liberty to tell who they are though. It took me quite some time to find out. Half the brokers advertising that they pay 95% are reselling to these guys. And I’d hate to tip anyone off that may be competition in my area.