All Forum Posts by: Michael Dunn

Need help in making a decision rather quickly , on which of the Forementioned to Loans I should go with , as I am due to sign a Purchasing Contract with the Heir of a property I am looking to buy , no later than Next Friday

I have read about both ( HELOC and Cash-Out refi _ , and still am not 100% sure, on which would make the most sense for me to go with

A Breakdown of my current situation:

I have roughly $40,000 in Equity on my Primary Residence 

I need approximately ( $22,000 - $25,000 ) for both the Down Payment and the Rehab on this Property  ( this is an Investment Property ) 

I know that HELOC's have a time frame for when they have to be payed back , whereas a Cash-Out refi. , just gets rolled into my current Mortgage payment , and therefore gets payed back over 30 years ?

A HELOC will likely cost me more monthly , due to the shorter term of the Loan

But, with a HELOC, I can always " Re-Borrow " the amount of the Loan that I pay back , which is something that I will likely need to have at my disposal , as I hope to do 2 Investment Purchases/Rehabs over the next few Years

HELOC's have NO Closing Costs whereas doing a Refi. does ?

HELOC's allow for quicker and faster Access to getting the Money than doing a Refi. does ?

HELOC's do NOT require an appraisal ( can usually have a CMA done on the property ) vs a Refi. always requires an Appraisal ?

It seems that a HELOC is the way t go for me , but just want clarification and for others to weigh in please :)

Patti Robertson and Zack Karp ....... Thank you both very much for your replies  ( very Informative ) 

Here is a Breakdown of my Current situation, and what I am Looking to achieve..........

I have right at $40,000 in Equity on my Primary Residence ( which I purchased with an FHA loan ) , right at 1 year ago

I am wanting to use my VA loan, to do a Cash-Out refi., and get roughly $25,000 out , to use as a Downpayment/Rehab on an Investment Property ( So borrow about 63% of the available Equity amount ), thus still leaving about $15,000 of Equity in my Primary

Since you can't use a VA loan to Purchase an Investment Property ........ What would be my best bet NOW / come the first part of 2018 ( which is when I'll be looking to purchase another Investment property ) .

Should I just do a Cash-Out refi. via a Conventional Loan Now , and get roughly $20,000 out to use ( assumes 80% LTV ) for the downpayment / Rehab on this Investment property that I'm trying to purchase , and therefore Keep my VA loan still Free and Clear, to use towards a possible Primary Residence in 2017 ?

Patti Robertson

Patti Robertson

Just need some confirmation , and or updates on the VA Laws and Requirements please.......

1. Does your VA Entitlement ever run out ?

Meaning that you lose it, if you don't use it after  X  number of years  ?

2. I currently have my Primary Residence with a FHA loan.

If I refi. my Primary into a VA loan ( I'm trying to get as much Equity out of my Primary as I can ) ........ Could I then , by say Jan. of 2018 ( the 1 year mark from when refi. out of FHA and into VA ) , could I refi. out of the VA loan , and then back into a FHA loan , and or Conv. loan ?

I'm trying to make sure that by the first of 2018 , that I have " Back " my VA loan freed up, and able to be used

Thanks so much for the help, advice and recommendation(s)  

Christopher Phillips

Christopher Phillips,

Thank you very much for your reply.... very Informative

Christopher Phillips

You want to buy a house that is in probate, which can take a long time. So you want to lease it for now, and then buy it when the probate is over. Correct?

1. That is Correct :)

The Property is not yet in Probate , but will be as soon as My Lawyer draws op the contract and the Heir and I agree to it and sign it 

MS has a 1 and a half Year Probate period

If that's right, you are only leasing it. So, there is no financing now. So you can't refinance something that you don't own and pull your rehab money out.

2. Yeah, this is what my main bit of concern is 

In the contract, I am going to have in there, that the Heir agrees to allow me to Rent out the Property 

This Property needs quite a bit of rehaba nd repair work done to it , which I myself am going to do pretty much all of the work 

I'm going to get the $ for the rehab , via doing a HELOC on my Primary ( I'll be able to pull out $20,000 ) I've already confirmed this with my Lender 

My main concern was me fixing this Property up, so that I can get it Rent ready , to Rent out to someone else during the Probate period and I collect the Rent money

At the same time, I will have increased the Value of the Property from Rehabbing it 

I didn't want to Put $20,000 into it, plus my time and equity in fixing if, if in the year and a half time , the Heir could null and void the Contract some how

That brings up the other question. Lease to own is really lease with an option to buy. So, you probably don't want to sink money into a house you don't own in the event that you don't actually buy it when probate is over (things happen). Can you rent it out while you leasing it? Depends on the agreement. Since you don't own it, that would be subletting and would depend on the agreement.

At the end of the probate and you buy the house, your loan will be based on the appraised value of the home. You would still need to apply and qualify for the loan and put money down. If you're occupying it you could do 3.5% down going FHA. If you're renting it, it would be conventional loan since you won't be occupying it. But they will only lend to you based on the agreed upon purchase price. The loan is always based on the lower value of sales price or appraisal. You can do a HELOCif you have equity you need to tap, but that's based on your ability to borrow.

3. Here's a Breakdown of the Costs aspects of the Property .......

I hope they agree to sell it to me for $23,000 ( in cash ) come the End of the Probate period 

I am going to give her $1,000 in cash up front ( as a Thank you/Incentive ) to sign the Contract , as well as pay $2,500 that is due on the Property in back taxes

So my All in will be roughly $25,000 + the $20,000 I put in to it in Rehab Costs ( so about $45,00 TOTAL ) 

This Property was her Grandfathers' and he passed away and willed it  her. The Property has been sitting in Distressed and un-occupied for almost 2 years. Nor she or anyone in the Family wants to fix it up or do anything with it .

So By me giving her $1,000 in cash upfront , Plus pay the Back Taxes on it , Plus her knowing that in a Year and Half she'll get $23,000 in Cash...... I'm hoping this all, is enough Incentive for her to sign and also for her to agree to let me rent it out to someone if I wish to , during the probate period

The Property's ARV once fixed up, will appraise for about $110,000  ( and this figure is based on very accurate comparable sold properties in the area/neighborhood ) 

In the year and a half's time that the Probate period is going on, I will pay off the $20,000 HELOC and should have no problem in getting out another HELOC to Pay the $23,000 in cash that I'll owe her 

Have you been pre approved for the purchase price?

Can they back out of the contract? It's possible to find some language in the agreement that allows them to try and break the option, but it won't necessarily be easy to do.

4. Is there anything else I need to be aware of or that I'm missing ?

Thanks so much for all of your help 

So I'm currently in a situation with a Property that I've never been in before, and need some help please, in how I should go about it . proceed , as well as a Refinance Question 

The Scenario:

So i talked to a Title Company (a Lawyer ) , and he said that I could do a Lease-to Buy/Own 

It would take 1 and a half years  ( TN/MS State Probate Law ) , before I could " Officialy " Pay for the Property and thus own it 

My Lawyer said that we could Set it up this way ( as Long as the Heir of the Property agrees to it ) ......... I could go ahead and Start fixing the place up ( Renovating it ) ...... It needs a lot done to it. 

Once I have it rent Ready , I could go ahead and start renting it out to someone 

Then come the Year and a Half mark , I would pay her the Amount that is agreed upon in the Contract we both sign 

My Questions are :

1. If I use my Own Cash to repair and fix the Place up ...... during the 1 and a half year Probate period ,....... Will I be able to Refinance the Property based on it's ARV , so that I can get my Cash " Back " ?

2. What ( if anything ) to I need to make sure is written in the Contract, for when she ( the Heir ) and I sign the Lease-to-Buy Contract ?

3. Once the Contract is signed / dated and Notarized ....... No one can Back out on the Contract correct ?

4. Even though the States Law says that 1 and a half years is the Probate time period ....... Can I purchase the house from her BEFORE the 1 and a half years is up ?

Thank you for any and all help ..... Title Searches, using a Lawyer to draw up a contract and Probate is all new to me . Just want to make sure I know all of my Facts before I have the Lawyer draw up the Contract next week 

Thanks so much 

Wayne and Rick H. , 

Thank you both so much for the great information 

Good Evening,

Here's a breakdown of what I currently know via what my Attorney ( Tile Company ) has told me .

So I've called and talked with my Attorney ( who does Title Searches ) , and they through the Title Search found out a few things.

My questions, regarding what he told me are:

1. Does the Heir have to go to the Attorney/Title company , to give them permission to put the Will through Probate, or can this part be bypassed altogether ) ?

2. I found out through my Attorney ( who did the Title Search for me ) , that $32,000 is owed to the IRS via the form of a Tax Lien . There are also 2 years of Property taxes that are owed 

3. In your opinion , should I go ahead and have my Attorney , submit to the IRS , my All-Cash offer ? And if so , what should be my Lowest Offer...... Try for Half of the $32,000 that's owed ( so an offer of $16,000 ) ?I just don't want to submit an offer for a price that is almost certain to get rejectedMaybe offer $21,000 ( 2/3 of what's owed ) ?

4. The Heir is likely not going to get any $ from the sell , so I'm wondering what Incentive she would have, to go to the Attorney and sign the papers to put the will through Probate ( if she even has to ) ? This house has been sitting there vaccant for going on 2 years now and she hasn't bothered with it , so I'm wondering how I can Incentive her to do what she needs to do ( if anything ) to get things moving along , so that I can purchase it :) ....... Maybe offer her some money for her time and effort ?

Thanks so much for any input insight and recommendations on what I should do next, and what my Options are 

David,

Thank you very much for the Information 

You mentioned issues I never thought about looking into ...... Really great stuff

Thanks again 

Ned,

Thank you for the Information and advice

I really appreciate that 

Wayne Brooks,

The way I understand it is.............. The Grandaughter of the man who last lived there , she is now the Heir of the Property

This property has been sitting vacant/distressed for over a year now

The Mother of the Daughter told me that the IRS " Owns " the property via a Lien , and that the amount of the Lien is for $55,000

I have the Cash to buy the Property ,but am still unsure of a few things :

1. Who do I need to call ( in the County / City ) of where this property is located , to go about offering them the Money to buy the Property ?

Someone in the Chancery Clerk in the County ? Tax Accessor ? Title Company ( ask the Heir / her mother , who the Property is Titled under ..... what the name of the Title company is ) ?

2. What is a Realistic Amount / Percent off of the $55,000 that I can get the Property for ....... Will they ( IRS ) on Average take 2/3 the amount of the Lien ( so $36,300 ) ? Or even they'll take 50% of what's owed on the Lien ( $27,500 ) ?