Buying a Duplex for what seller owes

7 Replies

Hey I am looking to purchase a duplex that I got off my mailers. The owner said she just wants to be done and will sell it to me for what she owes. My thoughts are that I want to buy this with a contract where she still has the mortgage. This way I can get into it with no money down. The PP is about my max of what I would consider a decent deal for this area right now. Numbers

PP $148,000 each side is a 2/1 800 sqft

Worth as is $170,000

Rent $1650

8.3% vacancy $137

taxes $175.75

Insurance $67

Water/Garbage $90 ( I will change this as I change tenants)

NOI $14888

Mortgage payments $998 ( this includes taxes/insurance)

Cash flow $5821

I want to just to just take over her payments on a contract then refi out in a year or two. However I have very limited knowledge in this area.

I know this can trigger the bank to call the note but has anyone had that happen? This was a BofA loan that was sold to flagstar bank.  

This property does need some work but I live a mile away and can fix a lot of it. The roof will also need to be repaired in a year or two.

Any imput would be grateful!

Elliot

@Elliot Smith why not purchase outright now? Either way now or in a year or two you will have to put the 25% down? If she has the mortgage in her name she can't give you a gift of equity at closing for a conventional mortgage. The down payment has to come out of your own funds. 

Originally posted by @Jerry Padilla :

@Elliot Smith why not purchase outright now? Either way now or in a year or two you will have to put the 25% down? If she has the mortgage in her name she can't give you a gift of equity at closing for a conventional mortgage. The down payment has to come out of your own funds. 

 We could however when we refinance it we will refinance on the appraised  value and not the sales price. There for we will be 70% ltv with no money out of pocket for a down payment. 

Elliot 

@Elliot Smith

Do you have a bank that does financing on appraised value and not purchase price? I have never heard of it. Banks want you to have skin on the game. 

Banks do the financing based on purchase price no matter how much equity you have. 

Originally posted by @Jerry Padilla :

@Elliot Smith

Do you have a bank that does financing on appraised value and not purchase price? I have never heard of it. Banks want you to have skin on the game. 

Banks do the financing based on purchase price no matter how much equity you have. 

 I do they will refinance based on an appraisal in 6-12months. Since I will hold title it will show that I am an owner of the property For that amount of time. The seller is giving me their ownership in the property they are just staying on the mortgage. 

I am buying this property subject to. 

Elliot

@Elliot Smith

Yes. If you are on title and can prove you have been making the payments for 12 months than you can refinance into your name. If not, it is a two year wait for you to be on title. I was just going to ask if she was willing to put you on the title with nothing down? But you beat me to it.

Originally posted by @Jerry Padilla :

@Elliot Smith why not purchase outright now? Either way now or in a year or two you will have to put the 25% down? If she has the mortgage in her name she can't give you a gift of equity at closing for a conventional mortgage. The down payment has to come out of your own funds. 

 So I got her off a yellow letter. She owes 148k and worth as is 170k however a normal buyer couldnt finance it due to needing a new roof. She does not want to spend anymore $ she wants to just walk away so I get a property with roughly 20k of equity with no money down. How ever we are expecting to spend 15k on rehabs but that should increase value to around 200k. And we have the cash for that no problem. 

@Elliot Smith ok. That make sense, why she would put you on title and you have something to gain and so does she! I just wanted to make sure she was willing to put you on title otherwise you would have still bedded the money for a down payment. Good due diligence on your part! I hope everything works out for you. I am always glad to answer any financing questions. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here