Is this too creative or will a lender agree?

Question

Hello BP and thanks in advance for any help you can provide.

I may have the opportunity to take control of a SFR property in Detroit using a lease agreement. The owner is highly motivated to not deal with the property; however, they still have a mortgage on the property. I am offering to take control of the property, pay for the rehab (approx. $10-15K to get rent ready) and I will cover taxes, insurance...the normal expenses. The owner will continue to solely pay the mortgage for the first 12 months, from 13-24th month I will pay 50% of mortgage. After 24 months I will either assume 100% of mortgage cost or have to exercise my option and purchase the property for remaining mortgage balance. Do lenders finance only the rehab cost of a property when their is still a lien on the property?

Emilio Basa · Answer

Hi @Lonniel Ingram  I agree with @Austin Youmans. Even though you are collecting cash flow you are technically not the "owner". That is unless you can purchase the property on land contract. If you did land contract you can go to the county and have your name on title which puts it on public record.

The most you can do is show income coming from the cash flow. You'll have to talk to your lender.

Austin Youmans · Answer

Sense you would just be leasing the property it couldn't be used as collateral.  there for you would just need to get a personal loan or line of credit on a different property.

Austin Youmans · Answer

Yes, since you don't own it a lender can not use it as collateral.

You might want to look into land contract like @Emilio Basa said. I don't know what a lender would think about that but it doesn't hurt to ask a lender.

Lonniel Ingram · Answer

@austin youmans thanks for the feedback. So even though I have an interest in the property and I will be receiving the cash flow; because I don't own it outright it's not considered for collateral?

Is this too creative or will a lender agree?

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