Credit at closing

2 Replies

Hi everyone.

I have a question to put out there. We are currently negotiating our first investment property purchase and have ran into a snag. The property is in need of some repair work, which totals an agreed price of $19,000.

The purchase price of the property is currently 235k and is a 4 unit multi fam.

The seller agrees to reduce the price of the property by the desired 19k amount to $221,000.

The problem we now have is we will not have any cash at closing to perform the repairs as we would have if issued a credit. Our lender will only allow a 2% credit on rental properties, so that leaves us with 4,370 at closing and a sale price reduction of 16,630 to 218,370.

 This leaves us with a measly $54 in mortgage payment savings and no cash. It would take us 25.66 years to recoup that money.

So my question is, what other options are available to us at this time, if any?

I could always ask the seller to make the repairs prior to the sale but the seller is out of state now and also with another offer on the table initially my fear is they would not deal with us any further.

Any help would be much appreciated.

People frequently leave so much out of their inquiry that it is very hard to completely understand the totality of the situation. Who is your lender? What kind of lender are they and what kind of loan are you getting? Will your lender even lend on a house that needs repairs? Have you tried looking at and approaching lenders that can offer you a type of loan that will include the purchase as well as an amount to effect repairs?

I get the feeling you are over extending yourself, trying to buy too much house when your cash reserves are so limited. Have you accounted for closing costs, insurance costs, cost of property taxes? What will you do if in the future you will need to make a costly repair?

Are you dependent on employment income to sustain making the payments on the loan? What if one of you loses their job? Can  a serious illness that will cause one of you or both to lose their earning power or income generation create a hardship for you?

You are trying to buy a home you really cannot afford to my thinking.

What is the purpose of buying this house? Will it be your principle residence or are you buying the house as an investment?

Does it make sense in your case to seek an equity partner in the form of a private investor/lender?

Don't jump from the frying pan into the fire. If you really need the owner to pay for and do the repairs then state so in your offer and never mind if he will just pass you by and offer to sell the house to someone else. You are trying to do something that will be good for you not something that will rob you of your quality of life. 

Forgive me if I have not been able to provide you with an adequate solution but with the limited information you provided this is all that comes mind.

Take the total $19k reduction and use a credit card and time to make the improvements!

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