All Forum Posts by: Sanat Bhandari

@Austin Gawthrop This might be region-specific but you may want to ask around for investor-friendly local banks who would be okay with you leveraging 80/20 with 80 being them and 20 being seller-financed downpayment so you're 100% leveraged into a deal

Unbelievable? Yes. Does it exist? Also yes. I just got off the phone with my banker prefacing this financing option with that they wouldn't prefer such a situation but can do it if the numbers make sense. You might have something/someone similar in your area (doesn't hurt to have an investor refer to their bankers so that you get better terms) 

If you can't find this then you can go with 10% down second-home option with a cosigner but keep in mind that most lenders are frowning upon this option as of now due to market conditions. If you can somehow manage to live in this property even for a couple days a week and have it as a primary residence, you can get away with 3.5% FHA or even 3% down conventional

I believe the name of the company that does this is Equity Assurance LLC per Pace Morby (the subto guy)

Along with due-on-sale insurance, you should have a decent umbrella policy with high coverage to protect yourself since the lender WILL foreclose on the seller if you can't pay them back

Keep in mind that if you don't pay the bank back within 30 days or so (whether that be sell/refi), they will tarnish seller's credit and then the seller can sue you

P.S To protect yourself and the seller even more, have solid private capital partners that can jump in to pay the lender off in addition to the aforementioned insurance policies

@Ashwin C. In the event that the lender finds out about title transfer, they can technically call the note due

However, that is all contingent on the lender finding out about it. I've personally never seen a performing note being called due

There is an insurance policy called due-on-sale insurance that protects against this very situation. Basically, if the loan is called due, they will pay the lender the full amount that is due and reinstate the mortgage at original terms

@Angel Lee What's your estimated credit score? Talk to a local bank/credit union that can do a portfolio loan for you. Their underwriting can help you get away with a potentially lower credit score

DSCR lenders place a huge amount of importance on credit score so if your credit is <640, it'll be hard to get approved for a DSCR loan (though most local banks are at 650, some might grant exceptions or go below that depending on your finances)

Feel free to PM me to go through your situation

@Cameron Salmon I agree with Steve's comment. Make sure they sign the decree before you proceed

Seller financing with pre-existing mortgage is what's called a hybrid subto by the Morby team. Seller holds the mortgage in his name but get a mortgage servicing company to make sure that payments are made to the first lien holder on time instead of relying on the seller while you make direct payments to the seller for his portion of the equity. Essentially, you have two finance payments per billing cycle on the property

YES, consult with an attorney and make sure you have all your ducks in a row before pulling the trigger on a relatively complicated transaction such as this. There's plenty of ways to land yourself in hot water with this strategy (ask the n number of people that have faced lawsuits due to deficiencies in subto agreements + communication)

Also, if this is your first deal, it wouldn't be a bad idea to get due-on-sale insurance to make sure you're covered on all fronts. Remember, you have a fiduciary duty towards the seller and his credit so protect him (and yourself) at all costs

@Lawrence Potts Check in with your attorney on the mechanics on execution but I would include a contingency to have the HELOC paid off at closing from his portion of equity. Let title take care of it

The more the liens you have on property, the more you run into the risk of potentially being over-collateralized. Ideally, in the hybrid subto you're mentioning, you would want to have two liens on the property with the existing bank financing in the first lien and seller equity in the second

@Sheri Noneya Either pay a title company to do it for you 

<or> 

You could go to your county deed office (office of deeds is what it's called in Nebraska), fill out a form, and they can take care of it for you 

@Nathan Smith Most local banks/credit unions/mortgage brokers (such as myself) should be able to finance this type of asset class. What are you looking at exactly? 

Feel free to DM me 

@Maddy Lakshmanan I recommend local credit unions/banks vis-a-vis larger lenders like Caliber since they can have flexible underwriting to help your particular situation out

Unfortunately, there's not a whole lot of lenders out there that can do 85 LTV on purchase. I know of some but I've never worked with them. Depending on the asset, DSCR loans are usually constrained by the DSC ratio much more so than the leverage that lenders allow

@Moe Khan Some answers:

- Yes, according to IRC, raw land can be used for a 1031 exchange. Make sure you talk to your attorney and CPA about setting up a QI (Qualified Intermediary) account for funds from the sale and the formal filing procedures for the 45/180 day rule (45 days to identify the property and 180 days to close on it). As long as you're using the proceeds from the sale for improved/larger real estate, you should be able to use them

- Talk to a land broker to get an informal and the second most accurate valuation for that piece of land. The most accurate value would be determined by a formal appraisal  

- Depends on the lender. Some local banks/credit unions might be willing to give you a LOC against land but you would have to demonstrate solid financials for ATR (ability to repay) since raw land by itself doesn't generate any income (there's exceptions to this though)