All Forum Posts by: Tom S.

@Michael Maalouli  Sorry to hear - what are the real estate agents saying, that start off strong and then stop working with you?  

Do you have proof of funds and loan pre-approval?  I found that's one of the biggest requirements: they have to know you actually can close the deal.

Welcome to BP btw!

@Kyong A Yee  As mentioned above, it depends on what the court order says, but just selling it seems like it would be a great financial win for her if she's struggling financially now.

I see at least $200k equity, $100k each in gross proceeds (before taxes, closing costs etc).  But if they bought at $350k , I assume with the downpayment, plus 8 years of payments, the currently loan balance should be a good amount less than $350k.

So should be some decent proceeds from the sale. 

@Sara Valentine  Just adding, you should at least let your insurance company know too.  Mine inspects the rental every other year, and if there's suddenly something new electrical there that wasn't when they issued the policy, never a good thing.

@John Wade  Great post and thank you for sharing.

I have a few commercial loans and seller financed loans that don't report to my personal credit.  And yes, when I applied for a conventional loan for my personal residence recently, it all had to be disclosed.

In fact, it was much more documentation than normal as I had to pull one year of loan statements for each loan, to show that it was paid on time.  For the seller financing, I had to locate the original notes from over 10 years ago.

All that said, the loans that don't report are still nice, but keep that those documentation requirements in mind.

@Michael Klinger  Just curious, what loan product did you end up choosing for this?

@Daniel M. Eads  Most lenders won't allow the downpayment to be borrowed.

As mentioned above, if you can owner occupy one of the units, the down will be much less.

@Franck Brichet  Personally I wouldn't touch this as it's too risky for you to put your money into the house, if you truly don't own it.  You mentioned the seller still has a mortgage.  You can't get clean title unless that original mortgage is paid off. 

As others mentioned, what if the seller doesn't make the mortgage payment and the house is foreclosed?  You would lose everything you're putting into the house for rehab, plus your downpayment and monthly payments.

@Abhishek Namani  I also don't see this a being a good deal, in fact, it would cash flow very negatively.

I calc about $2400 per month for just the mortgage and interest. With property taxes, insurance, HOA and misc (vacancy, maintenance, etc) you would be losing a lot per month with only $2k monthly in rental income.

@Melanie Graham  I would assume it's a seller financed 2nd mortgage.  I've done a number of similar deals as a buyer, 80% of purchase funds from the 1st mortgage lender, and 15% of the funds from the seller as a 2nd position mortgage.  So effectively 5% down on an investment property.

For simplicity, the 2nd mortgage is interest only and then the balance due in 5 years.  In the meantime you make improvements to the property and force appreciation, so you can re-finance within those 5 years to pay off the 2nd mortgage.  

Typically this has to be done with a commercial loan for the 1st, conventional financing usually don't allow this scenario.  

@Jadon Grant  As others mentioned, the least expensive way is to buy your personal residence.  3.5% to 5% down, and you'll get the longest terms and best rates.

If you hunt a bit, you may be able to get a seller financed deal.  My first SF purchase was $80k and 10% down, so $8k and about $1500 in closing costs.

Most importantly, if renting it out, make sure you have plenty of cash reserves to cover the unexpected.

Good luck!