How would you finance this?

[Jordan Craig]

Alright so a little bit of preface- my wife and I purchased a duplex in March of this year, moved into one of the units a month later and we've been renting out the other unit to inherited tenants (they are great btw).
After living here for a month or so we noticed that another duplex down the street never had any cars there and after checking, we found out it's abandoned and trashed. We've reached out to the property owners and we are chatting with them but I need some help before I try and make an offer on the home. 
We used up most of our DTI on our current property so what would be the best way to make this happen? I think the homeowners still have a mortgage so I doubt seller financing would work. Should we pull out a heloc and try to buy as an investment property? We can't move cause we are only 6 months into our owner occupied mortgage. Does that leave DSCR (it will definitely cash flow ~300/month) or private/hard money? Should we use a heloc as a down payment (we walked into equity after putting 20% down and we could get 90% LTV). Any recommendations?

[Ken M.]

Quote from @Jordan Craig:

@Ken M. How would that look? I'm not familiar with that option. I thought owner financing would require them to own the property in full. Unless you're talking about a "subject to" mortgage. I don't know much about that option either but I've heard it's not recommended. 

I do both Subject To & Wraps, but in your case I recommend a "Wrap". It's basically having an attorney write a Mortgage that "wraps" the existing mortgage.

So, if the loan payoff is $225,000 and the existing interest rate is 4.5% with 280 months left on the loan, and you negotiate $20,000 cash to the seller with a "carryback" of $40,000 - you would write it up as a sales price of $225,000 plus $20,000 plus $40,000 for a sale total of $285,000 and a mortgage for $225,000 plus $40,000 for a loan amount of $265,000 at 4.5% with a cash payment to the seller for $20,000 at closing. You make the monthly payments to the seller, they make their monthly payment to the bank. This is just an example. 

It depends on what terms you negotiate. But the seller's loan gets "Wrapped" into your new loan with the seller. You two have to decide how payments are made etc. We teach this of course, but you may be able to get the attorney to set it up for you.