Is an assumable mortgage my only option?

Question

Investment Info:

Single-family residence buy & hold investment in North San Juan.

Purchase price: $500,000

Cash invested: $100,000

Working on financing. Hoping to get an assignable mortgage only because Hard Money is 11% 12 months and that changes my numbers for the negative cash flow. Secondly the property is inhabitable (demo by seller who never completed it) and conventional financing will not work on such property.

What made you interested in investing in this type of deal?

The location and growth in the next few years. I’ve always loved the area and wanted a primary here 10 years ago!

How did you find this deal and how did you negotiate it?

MLS in negotiations with seller to possibly do owner financing. I could use tips on how to negotiate this to my benefit and hit my numbers.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am a real estate agent.

Dana Keuning · Answer

I found out that there is not a mortgage that the seller has a personal loan from her father. So I am not sure of their agreement but they are asking me what type of terms I would be looking to get. 200 days on market. Over priced IMO and obviously every other investor has passed it up for whatever reason. End buyers can’t get loans on it so I’m thinking of asking 3.5% and low balling their asking price to my opinion of market price. I’ll probably get a “no” but it may start conversation. Don’t they say, “if your first offer gets accepted, you’ve paid too much.”

If you have any suggestions on terms for a personal loan like this I’d appreciate it. The home needs $300k in renovations to complete it property. ARV on it is good and short or long term rental is good if I get it for the right price.

Malcomb Stapel · Answer

@Dana Keuning  assumable would certainly be something to look into. Do you know what the numbers look like for their current mortgage? Also,the lender will may not go for it, so you may have to do some sort of land trust or possibly a master lease option. Or ask about seller financing. Frame it as a way for them to see the deal through and continue making money on it. Know what terms you would need (worst case scenario) before you present the idea. That way you don't agree to something in the heat of the moment that actually doesn't work numbers wise.

1. Assumable mortgage

2. MLO

3. Seller carry

That's three options you can look at.