What is lending ones' credit worth?

Hypothetical:

Have a buyer with 15K cash, but crappy credit.

I buy a 100K house for 95K, plus 4k closing costs

I instantly sell to buyer for 10% markup, 108,900 (99k + 10%). Minus his 15K, I finance 93,900 at 10% on 30 year am, 3 yr balloon. His P&I is 817.00

I use his 15K to pay my 4k closing and use the other 11k as my down, financing 84k a 6.5% on 30 yr fixed. P&I is about 553.00.

So, I've got 264 a month positive, plus 9,900 equity srpead (108,900 minus my cost 99k).

If he waits the full 3 years to refi, I make 19,404 (9,900 + 9,504). Minimum profit after 1 year is 13,068 (9,900 + 264*12). And I'm fully protected by having title to a 100K house that I have absolutely none of my own cash into. Worst case I have to foreclose and get the house back.

For discussion sake, is this a good deal or not for an investor? Please, let's hear your thoughts. If not, what would make it a good deal?

Dutch







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Dutch nice stratergy, but I'm looking to make my first purchase any financing advice for a neophyte?

In theory this sounds like a good deal, depending on your comfort with the bad credit.

My personal comfort level with bad credit is quite low, so I might take a pass. But that's just me.

if everythign goes perfect you are golden .. but nothing ever goes perfect . there is a reason that the guy has bad credit even if he pays he may pay late and leaving you bad off... this is not a good deal risk greater than the reward