All Forum Posts by: Ashley Nelson

Hi Ashley,

I believe Marty's first recommendation is likely your best bet to keep all of your seller financing. You'd be looking at a heavy rehab on a commercial property so it's unlikely that most lenders would allow a 2nd lien or be willing to take the 2nd position. Going with an unsecured or potentially HELOC on your primary may be your best options to keep the seller credit, but I don't know if they would necessarily be the best options in the long run for you since those will have significantly higher rates and closing costs on them.

Out of curiosity what sort of rates were you getting for purchase and rehab options on this one?

@Ashley Nelson always a sweet deal when you can secure with seller financing! It's hard to walk away from that when available. In your example here I really see two options:

1) Keep the seller financing, and utilize an unsecured loan by means of either a private investor (whatever you work out between you is your business), or by that of a personal loan, which would require very good income, credit, DTI etc to hit the $400k amount you're looking for. If you have an operating business with strong monthly cashflow, you could also look at an unsecured business loan.

2) Utilize a Purchase and Rehab loan with private/hard money. Depending on how well the numbers pencil out, location, assets, your experience etc, you could potentially obtain around 85% LTC. Some will also let you leverage a seller 2nd for the remaining 15%, though you'd still need to show 20% of rehab in reserves + sometimes 6 mos interest-only payments in reserves as well + closing costs. All things to consider.

Not all lenders allow for seller 2nds of course, so you'd have to shop around for one that would allow it. Im not sure exactly where this deal is located.

Thanks and hope this helps!

Sounds like you are in a great position financially, congrats on choosing real estate!

A few things I'd keep in mind:

1. The power of leverage is the largest part of wealth building in real estate. You earn appreciation based on the market value of the property, not your equity. At 75% LTV you are making 4x as much as you would by owning the property without a mortgage.

2. Interest rates for primary residence are typically about 1 percentage point lower than conforming investor loans so if you can buy a new primary residence and rent you current one out you will save a lot of money on interest payments.

3. Re-read #1 - consider a cash out refinance on that primary then use that cash to buy more real estate.

Many of our properties are now in "infinite return" on our investment because we refinanced to pull our original investment out so we are making cash flow and appreciation but actually have $0 invested in the houses.

I did the 1-2 houses per year for quite a few years, sold some to reallocate investments at times and found that was about the maximum pace I could handle while working my W2. I encourage you to work on that plan - it will deliver results long term that you will be very happy with.