The Auction House -- Creative Financing

One catch to buying a property at auction is that they almost always require a cash purchase.  I am finding out that this basically means that there can't be any financing contingency in the contract, and generally you won't be able to get a loan on the property because you often don't have access to it before closing for an inspection or a appraisal.  So if you don't have the cash on hand, or don't want to use other options such as selling stock and paying the taxes, taking a loan against your 401k (5 year amortization makes a BIG payment) then you have to get a little more creative.

As I may have mentioned in the first blog post, we paid cash for our first property, just wanting the extra security of not having a mortgage to pay, at least until we had income coming in from tenants.  With tenants now in that first property (Flynn St Condo), we felt good about getting a mortgage to use to buy the auction house.  In pursuing this option, we found out that because the developer still owns 10 out of 46 units, no FNMA (Fannie Mae) backed bank will do the loan.  After searching far (New York) and near (right here in Tennessee) we finally found a local bank that would do the loan in house.  We ended up getting 100% of the amount needed for the purchase on an 18 mo. loan, amortized at 30 yrs, at 6%, with low closing costs.  Seems better than hard money!  This will give us time to get the Auction House rehabbed, rented out, and re-financed on a longer term loan, while the Flynn St tenants pay the note.  BRRRR (Just like Brandon says!).  The bank president signed off on the loan this week, they waved the appraisal since we just bought it in February (without an appraisal at that time as well), so we should have the cash late this week to be able to close on the Auction House around July 8th!  

Next post should be after closing and the BIG REVEAL when we actually get to look at the inside!  Exciting and scary at the same time!  Stay tuned!