How to Buy $55k property in cash?

Question

Hi guys,

I'm currently looking into a deal in a low end part of Dallas where a 3 bed 2 bath SFH is on the market for $55k.  The current tenant pays $750 and the rental comps support it raising to $850-$900, along with the section 8 pricing actually being $1030 a month.  The taxes and insurance would be low on this property, so overall it seems like a solid deal that could potentially almost meet the 2% rule.

However...the seller wants cash.  This property has been fully updated and needs almost no repairs, and I think based on comps it would actually appraise for $65-70k (in fact, a smaller house 2 streets over is under contract for $89k).  But based on what the seller is saying, she just wants to get it sold and ASAP, so cash is what she wants.

So that brings me to the question... Where should I try to get $55k?  Personally, I have about $25k I could put into the deal, but I'd still need another $30k.  At the end of the day, I want to buy and hold on this property, so I'd like a way to come up with the cash and refinance ASAP to get my cash out and have a traditional rental property.  I've looked into hard money and personal loans and while some lenders do deal with amounts around 30-40K, most don't, and the ones that do have very high fees.

I'm not sure if there is a creative option I'm missing here, but I'd love any and all advice on the best way to get myself into a traditional mortgage on a 55k property, but with cash up front.

Thanks for the help!

Kelton Johnson · Answer

Account Closed

Yeah, my parents are strapped for cash right now, but I do have a few relatives who I could ask.  I've just always been a 'figure it out myself' kinda guy and hate to seem like I'm looking for handouts. That being said, asking family is still one of my top options, but I'd have to wait 6 months to cash out refinance and pay them back, right?

Kelton Johnson · Answer

@Jaysen Medhurst @Kevin Fox

You both make some solid points.  I've only had one short conversation with the seller (it's for sale by owner).  During the conversation she just said she wants to get rid of it and not have to wait any longer and that cash is easier for that.  Which, I of course followed up with by asking if it would appraise for the selling price or higher and she acted confident it would.  Obviously that's not something you just take the seller's word for, but it was definitely what she said.

I like Kevin's idea though.  Basically just offer an attractive financed deal where I can still get an appraisal and have the option to back out, but it will close in a timely manner.  I'm not too familiar with how to write something like that up (high EMD, short due diligence, etc) but I'm hoping my real estate agent knows how.  :P

Jaysen Medhurst · Answer

@Kelton Johnson, playing devil's advocate, why cash only? I'm suspicious that there might be a reason the property won't qualify for a mortgage. Be very thorough with your due diligence.

Brent Coombs · Answer

Ask Lenders this question:- If I come up with the cash, and title transfers to me, can I apply for "delayed financing exception" up to the full purchase price (so long as it appraises for 140%+ of my purchase price) - without waiting six months? (Remember: "Delayed Financing Exception").

If yes, get that in writing. Maybe ask for an official appraisal BEFORE proceeding? All the best...

Kelton Johnson · Answer

Account Closed

Oh this one is already in the hood, it's just been renovated already so it won't need a lot of work.  Not to mention a steady tenant is already in place which means a lot in an area like this.

Charlie DiLisio · Answer

I would also check with the building department to make sure the re-hab doesn't have any violations on the property which you would inherit.  eeaeasy to check on by being discrete.  good luck!

Kevin Fox · Answer

Hey @Kelton Johnson

Did the seller give any indication as to why they will only consider cash? A lot of sellers will say that, but when you hit them with a competitive financed offer (shortened loan/appraisal contingency, high EMD, short due diligence, etc) and pre-approval, they almost always reconsider.

Really, the only reason cash offers are more attractive than financed offers is because of the uncertainty pertaining to the borrower as well as the property qualifying and appraising. With such a small loan amount, the property having been recently renovated, and what you said about comps in the area all selling $10-15K higher than asking price; none of those things should really be an issue.

How to Buy $55k property in cash?

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