How To Re-fi A FSBO In The Pittsburgh Area

5 Replies

Hello BP! I'm currently working on a deal in the pittsburgh area. I talked the homeowner into holding a note on a property during the rehab. I then will re-fi and pay him off and the private money lenders that I found. I thought I had a bank but I would need a loan on the property to then re-fi out of. Being that the homeowner doesn't have a mortgage and will be holding the property how do I re-fi out to pay him off and the private lenders?

Here are the numbers on the deal. It is a duplex that will bring in $900 to $1,100 a month. Renters would pay their own utilities.

House, rehab, and loan info: House $65,000 / pay the homeowner $5,000 when the contract is written up. Pay the homeowner 6% on the $60,000 over 12 months (6% of $60,000 = $3,600/12 is $300 a month). ARV of the property is $130,000 to $145,000. Rehab will be around $30,000 and I will be paying 6% on the private money upfront ($30,000x6% = $1,800). I'm looking to see if others think this deal would work, but mainly looking for a bank that I can re-fi to pay off the homeowner and the private money. Best option is to find a bank that I can do this and that has little to no seasoning period. I would love to get the rehab done in 2-3 months re-fi out pay everyone off and start working on another deal. Any and all help would be greatly appreciated!

Well, I’d the owner “holds a note”, then that means he holds a note And a mortgage, and you get title at closing.  Refinancing him out is the same as having any other mtg.

Hey @Kris Rudge   I have a few questions...What do you mean "pay the homeowever $5k when the contract is written up"?  Do you mean at closing, the seller will receive $5k and then the seller is financing $60k?  Then it looks like you are making interest only payments to the seller (@6% on the $60k for 12 months).  That should all be secured by a mortgage.  In other words, you'll have a note and a mortgage.  It looks like the seller would be in first position and the private lender would be in second position (unless the private lender is friends or family and they said they don't want/need this loan to be secured).

Regardless to all of my questions, whether the seller is financing the loan and/or the private lender is financing a portion, it should all be secured via a mortgage (or possibly two).  But that shouldn't matter when you go to refi.  If/when you go to a back to refi, they'll ask you if you have any mortgages/liens against the property.  Doesn't really matter what you say, b/c they will check!  As you go through the process and close on the loan, there will be a title search and if you have recorded mortgages against the property, those will show up. 

S&T Bank is local and investor friendly.  I'm going through my first refi with them currently.  They don't require a seasoning period, per se, but they will point out that having a renter in place for 3/6/9 months etc. helps make the overall application look stronger.  

Hopefully I interpreted your questions correctly and didn't ramble too much!  

Thank you Chris for your reply. Yes I will pay the homeowner $5K at closing and he will finance the $60K at 6% interest for 12 months, or shorter when I re-fi out. When you said it should all be secured with a mortgage how do I go about doing that if I'm not wanting to put 20% down. I'm sorry if these questions, or the way I'm wording this questions is odd or difficult to follow but I'm still really new to this all and this is the portion of the whole investing game that I struggle. I'm sure the homeowner would want to be in first position but that was not talked about and now I know to talk about that in further deals. The private money are friends/co-workers. If the homeowner is in first position then when I re-fi out into a new loan and pay him his $60K then he and I are done and all squared away? And thanks for suggesting S&T bank I will give them a call.

Originally posted by @Kris Rudge :

Thank you Chris for your reply. Yes I will pay the homeowner $5K at closing and he will finance the $60K at 6% interest for 12 months, or shorter when I re-fi out. When you said it should all be secured with a mortgage how do I go about doing that if I'm not wanting to put 20% down. I'm sorry if these questions, or the way I'm wording this questions is odd or difficult to follow but I'm still really new to this all and this is the portion of the whole investing game that I struggle. I'm sure the homeowner would want to be in first position but that was not talked about and now I know to talk about that in further deals. The private money are friends/co-workers. If the homeowner is in first position then when I re-fi out into a new loan and pay him his $60K then he and I are done and all squared away? And thanks for suggesting S&T bank I will give them a call.

The mortgage is really just an agreement between you and the lender (who in this case is the seller) that says the lender can take the house if you fail to honor the promissory note.  You record the mortgage with the county, so if/when a future title search is completed, the mortgage will show up.  For example, if you have this loan with the seller and sell the house (without the former seller being aware), and try to take those sales proceeds but NOT payoff the mortgage, the mortgage prevents this from happening.  B/c when you (re)sale this property, b/c of the recorded mortgage, at that closing, they'll need a mortgage payoff statement.  That mortgage gets paid off and then satisfied with the county.  

So, in Allegheny County, for this deal, you'll need a mortgage and a note.  I'd be happy to share what I have used in the past.  I will DM you.  And don't worry, this seems overwhelming at first.  But the nice thing is, once you get these concepts down, it's really straightforward.  But the first time going through it can be confusing.  

Regarding your friends and family loan...IMO, it's best to secure that too, for them.  So you would have a second mortgage and note.  Even though I'm sure you'd do the right thing, if unpredictable, bad things happen, it's better to have them protected.  Recording and satisfying mortgages only add a few hundred dollars to a deal.  From a legal and (possibly) tax perspective, it's best, IMO to do it the right way.  


Let me know if you have more questions! 

 

Thank you so much Chris! You are so helpful i cant even put into words. Makes a little more sense. And thanks again for all your help i greatly appreciate it!