Seller Financing And Credit-challenged Buyers
Have a client who's interested in buying inexpensive (< $100k around here) places and reselling to credit-challenged buyers using seller financing. Basically, a way to turn cash into notes that pay a high rate of interest.
Any comments?
If you do this, is it better to split the loan into a couple pieces, say 80%/20%, and resell one (presumably the first, since the second probably would require a huge discount to sell).
The thought was something like find places that can be purchased for less-than-retail prices with cash offers, and resell at the retail price point.
All of your thoughts are perfectly sound, and yes it is a good idea to split them up into two to optimize, or should I say minimize, the discount taken when your client goes to sell first to cash out. Great way to have your cake and eat it too, just make sure buyers are pre-screened properly to get the best one.
YOu are right about the seconds, there are investors who will buy those, but they are high risk, and will only pay up to 30% on the face value. Holding the seconds could be great for cash flow as well as tax reasons.
Best of luck, Dave