Looking for Recommendations

5 Replies

Your goals and story: am trying to buy Mom's single family residence from her on the coast. We need to do about $50-60k of repairs. After that our two exit options are sell the property or get a short-term rental permit and put it on Air BnB, etc. Hurdle right now is DTI numbers are not working for conventional financing (due to exorbitant property taxes on this property of around $20k/year).

Type of property: Beach Front Single family home on Oregon Coast. 3700 sq ft. 3br/3.5ba + kids sleeping loft. 

Location of property: Newport, Oregon

Purpose of financing: purchase

Type of financing sought: Not sure, I am being gifted all equity in home and using this loan to payoff existing lenders: ~$390k first+HELOC

Current or prior ownership of real estate: I’m part owner of a commercial property valued at $1.67mm (I own 39%)

Occupancy: Mom will temporarily rent back from me while we do some fixes

Value of property at present and/or your offer price: $1,100,000

After repair value: Same

Anticipated or actual appraisal issues: Had a recent appraisal at $1,076,000 Feb 2020 (then COVID hit and previous financing dried up)

Current rents per month: $N/A

Fair market rents per month: $ Don’t know

Down payment or equity: Approx. $700k in equity

Source of down payment funds, if applicable: Gift Equity

Income Source: Salaried W2, +Bonus, Commissions, plus commercial property income

Gross monthly income (optional): $8,750 (avg. for last year) + $3,000 from commercial property

Monthly debt obligations appearing: $597 car payments, $54 credit card payment

FICO: 720.

Credit issues: None

@Cameron Hunt I have a few lenders I work with who know the Oregon Coast market well and might have some options for you. Selling should be easy right now, inventory is the lowest it has ever been. With Regards to renting the home as a vacation rental, that is going to be dependent on the exact location of the home. Some parts of Newport allow vacation rentals, other areas do not allow them at all.

Hi Taj, That’s great! I’ll send you a message. As far as rental, I have confirmed short term is available in the my area, just have to upgrade a few items to pass the required inspection for permit. 

Hi @Cameron Hunt , thank you for providing all of this context! Couple options and questions for you:

1) Purchase as an investment property from your mother using the equity as your downpayment. Was the original appraisal done as an investment property or a primary/secondary residence? If you appraise the home as an investment property, your rate may be slightly higher than buying it as a primary/secondary home, but you can use 75% of the 1007 Rental Schedule income from the appraisal to potentially help your debt ratios qualify for the new conventional loan.

2) Add your name to title and wait 6 months while you make repairs to the property. You could then cash out refinance and pay off the 1st/2nd liens, and maybe pay yourself back for the $50k - $60k in repairs if you plan to go the route of AirBnB vs. selling right away. Typically being added to title and then refinancing 6 months later is the route to go to help your mom avoid capital gains, but if this is her primary residence on the Oregon Coast and she won't pay capital gains, then it makes more sense to purchase the property from her now.

Please feel free to message me if you want to dive deeper into any of this. I am happy to help!