Equity Line of Credit on Owner Financed House
I am looking to acquire a $500k 6 unit apartment building. One of the options to purchase the property it through owner financing ($2,300-$2,400 per month for 20 years 0% loan). If I purchase the apartment building using owner financing, I am curious if a bank will allow me to take out a line of credit or mortgage against $350k of equity and use it as:
a) funds for renovation AND (~$50k)
b) down payment (~$300k) for another ~$1.2M apartment building
In this scenario, I would then have a note with the owner of the 6 unit apartment building, a line of credit against that same property, and a loan against a new property. Will banks allow this type of lending? Will they ask about any private notes against the property? Do I have to disclose the owner financing? Will this owner financing come up during title search? Can I have the owner financing be a unsecured note? Will this note ever show up on my credit report?
Thank you in advance for the help!
Best,
Alex Jackman
Most Popular Reply
Hey @Alex Jackman a slightly inflated price for 0% interest does not protect you or him on anything. The price is the price. While 0% for 20 years would be super duper fantastic for you, does absolutely NOTHING for the seller except causes him to lose out on hundreds of thousands of dollars in interest.
I have gotten some owner financing at 0% interest for 6 months and up to a year. Not too big of a deal, but REALLY 20 years?!?! I might even try to get 5 years and then balloon the note after that. In 5 years you should have the property up and running and be ready to refinance it within that time period.
If you really intend to make it in this business you need to deal with people honestly and treat people right. Find out what is important to him and try to give it to him while at the same time make sure there is some profit in it for you also. If it does not work for you, walk away. Dont try to make him get into a deal by deception.
It sounds like you are trying to scam the bank to put a lien on a property that already has owner financing on it(deception). You should file the owner financing deed of trust with the county. YES the bank will pick it up and NO you can not get financing of double the value of the property.