All Forum Posts by: Nathan Gesner

@Rick H. thanks for the comment but I think you missed some of my previous posts.

Let me explain this one more time for those that don't want to read back from the beginning. The owners were headed to foreclosure in less than 24 hours. If it foreclosed, they would not be able to buy it back, nor could I afford to buy it back. I loaned them $11,000 (fully documented) to stop the foreclosure and save the home.

These are good, honest people in a difficult situation. I've known them for four years and trust they will always do the right thing. I appreciate everyone's concerns but please stop telling me how to protect myself when things turn south because I am a big boy and can handle it or accept the losses if something falls apart.

@Jerry W. I am willing to lose cash-flow on this one for a couple years but get some serious equity. I can buy this and get approximately $110,000 in equity immediately and the rent will cover the mortgage so it's not like I'm throwing money away. If I put down 20% I'll have 60% equity. I also project $1,000 cash flow after two years.

I appreciate the invitation to help roof but I'm renovating my own little hoarder house right now and it's a month behind schedule!

I'm meeting with my attorney on Tuesday to discuss Sub-to, Land Trust, and other options but I think I'll just buy through a local lender. I have a strong history with them and this property will have 50% equity so it should be easy.

As I said, this is a lengthy issue. The current owners are unsophisticated people and bad at managing money. They have a severely disabled son that requires full-time care and it's not cheap. They took a big financial hit last winter that put them in a bad situation and their income was cut by about 1/3. Once they get things straightened out in the next 6 months or so, they will be fine. They can't survive on their own until then.

Their income is $2500. Their mortgage is $1,000 and utilities run about $200. Just food, diapers, and medicines for their disabled son runs around $800. That leaves $500 for the other three family members.

According to you've shared and what I've read, it could be considered "fraud" to deed the property to me and then rent it back from me. I don't understand why that is. I've searched and don't find it addressed in Wyoming law so I'll have to talk to my attorney.

My intent is to help this family stay in the home. I'm not wealthy enough to gift them the money needed. They need more than local churches could provide and the State can't help them for another 6 - 9 months. If I don't do something, they will eventually default on the mortgage and lose the home. The only option is to get them out from under the mortgage, rent it back to them cheap, and help them catch back up. They could default in the payment of rent but you just have to trust me when I say these are good people that will do the right thing. They are unsophisticated but they see the gravity of the situation and that I am trying to save them.

I need to talk to an attorney but it appears it may be wiser to just purchase the property.

And a follow-up...

I'm reading some articles on the subject-to option. If I understand it correctly, the seller would file a Quit Claim Deed transferring the property to me. I become the legal owner. However, the seller is still on the hook for the current mortgage but I am the one making the payments. This gets the owner out of their mess and gives me ownership without going through a lender, closing costs, etc. The seller also gets the benefit of good payment history which will help their credit recover.

I also read about putting the property under a Land Trust with me as the Trustee. This is a way of assigning me interest and giving me control but providing a little more protection for the buyer.

If anyone has personal experience with a subject-to that is willing to share that experience, please message me!

@Westley Bachmeyer, I've already spoken with the current lender and they will not allow an assumption.

@David Dachtera They may not require 20% down. I just don't know because my lender hasn't given me an answer. If I buy it at 50% LTV - or even 70% LTV - then it has enough equity that I should be required to put anything down.

@Rick Pozos I've read about Sub-To and understand the concept but have never done it nor do I know anyone that has. It sounds simple enough and very low-risk, but I'm not going into something unless I know what I'm doing. 

As I said, this is the initial phase and I'm just considering options. This literally happened this morning at 11am and I had a busy day at work so there was little time to think about it. My initial thought was to assume the loan but that option is dead in the water. Next option is to either purchase through a local lender. I'm also considering finding an investment lender but that would require working with an unknown and higher rates. Sub-to sounds like a great option and seems easy from what I've read but I really need to study up on it. I would appreciate it if someone has a good discussion thread they could point me to.

Thank you for all the responses so far!

@Jassem A. I am actually kicking that idea around. Our original intent was for me to purchase the property and then rent it to them for around 50% of market value ($600). My concern is they will squander the lump sum and be right back in the same boat. We are now considering a lower purchase price but crediting them "free" rent for a certain number of months. The problem is that the bank will want 20% down on the purchase price, so how do I escape that?

I'm not comfortable with a "subject to" deal and their bank won't allow an assumption, so I decided to stick with traditional financing.

I'm definitely not trying to skirt any laws. I just wasn't thinking clearly.

If I buy the property for $135,000 the bank will want 20% down which is $27,000. I intend to put down $30,000 and finance $105,000. I just got confused because I "loaned" $11,000 to the owners already. As long as I can include that $11,000 as part of my down-payment, everything should flow just like a normal purchase.

This is what happens when I try to perform math in public. Sorry for wasting anyone's time!

There's a lot of background on this but I'm going to keep it as short as possible because I have a very specific question. I am a REALTOR and intimately familiar with the home, the property value, and the rental value. You can safely assume my numbers are correct.

I wired $11,000 to their bank 18 hours prior to the courthouse sale and stopped the foreclosure process. Owners want to sell me the property and then rent it back. Actual property value is $220,000. Owners owe $105,000. They are willing to sell it to me for $140,000 minus the $11,000 I already paid to stop the foreclosure. This puts $25,000 in their pocket and gives me a property with immediate equity.

To summarize, I already paid $11,000 in cash and intend to pay another $19,000 in cash. That leaves $110,000 to finance on a property valued at $220,000.

How do I structure this to ensure the bank lends on it? If I say I'm buying it for $140,000 they will want 20% down ($28,000) but I've already put $11,000 towards the purchase that the bank won't count and I've only got $19,000 more available (plus closing costs). If I say the purchase price is $105,000 they will want $21,000 down. I can afford that but then the owner isn't getting their $25,000 in cash.

Is this making sense? Does anyone have a suggestion?

@Luc Boiron @Jim Stevenson

Thanks for checking in. We're still working on the home. It's hard to renovate in a timely fashion with three young children on summer break, visiting families, and a full-time business to run. So we're still plugging away!

One of the first projects involved replacing the furnace and duct work. You can see the original setup in the pictures above. The furnace had six burners, only four of which worked. The CO2 levels were off the charts and it's a wonder nobody was poisoned. We put in a new high-efficiency furnace with a much smaller footprint and replaced all the duct work. The ceilings are very low in the basement so we needed to get back as much head space as possible.

This is the original furnace and duct work. The white tape is asbestos.

We've removed the old furnace and duct work:

Here it is with the new furnace installed:

See that big opening? That was previously blocked by the old furnace. The new system has a much smaller footprint and most of the duct work is tucked into the ceiling to save head room. THe only piece that sits low is in this picture but it's still up high enough that anyone under 6' can walk under it.

The new air intake and filter is upstairs. I prefer to keep the filter upstairs because it stops dirt and such from getting into the duct work.

And this is another improvement. The old furnace didn't have any ducts to heat the basement. I guess they thought the carbon monoxide would kill people off before they had a chance to feel cold!

Next up: electric and the back yard!

There aren't a lot of Wyoming folks on here. I'm in Cody and all the investors I work with stay within 50 miles of here. You are probably looking for someone in the western border of Wyoming, which I can't help with.