All Forum Posts by: Derek Dombeck

Assuming that you have the property titled in an LLC currently, I don't think this will work since you are the Member of the selling entity. If its titled in your personal name, it would just be a refinance.

I would try to find a friend or family member who has an under performing IRA or has money in a bank CD. Give them a 2nd mortgage in exchange for your equity. You get the cash, they get a safe stable investment, and it never appears on your credit.

I would learn as much as possible about Options, Lease/Options, Masterleasing, Buying Subject to Existing Debt, Installment Sales, and Tax Laws pertaining to real estate sales. Check out Cashflowdepot.com 

Listen to Peter Fortunato, Dyches Boddiford, David Tillney, Jack Miller, and Bill Cook as much as possible. Jack is no longer with us, but the rest of them are friends of mine and some of the best creative deal structures in the country. 

Everytime I make a terms offer, I make sure the seller understands the importance of us working together to benefit each other. One of the requirements, is they need to be honest with me about ALL the numbers, including their debt. If you new the terms of the debt, you could possibly buy the property subject to the existing loan and give them cash for their equity. Or, you could structure an option to purchase. Or, 20 other possible structures..........

My point is, you need more details about their situation and goals.

I can't guarantee this, but my assumption is they figured out what it would cost to hire out everything based on your scope of work. The reason likely is because you are new to the business and have no track record of being able to do the work yourself. 

As a lender, we often have to protect people from themselves. If you fail to get the job done properly  and the lender has to foreclose,  they are not going to do the work themselves to finish the house. They may hire contractors or just sell the house as is and take a lower sale price. 

Right now, the lender is also looking at the risk vs reward of a current 2 bedroom houses value compared to a potential 3 bedroom houses value. I say risk, because when a flipper/ landlord guts a property at the beginning of a rehab, they have temporarily devalued the place potentially to a lower value than the amount of money  borrowed against it. I've had it happen on 1 of our loans and it sucks as a lender.

That's what I believe is likely happening. 

Good Luck with your 1st deal!

In a refinance, assuming the new lender will go up to 80% LTV, you will keep any additional money that's left after the balloon payment and closing costs are paid. You likely will not need to bring any cash to the table unless property values go down and the new appraisal doesn't support the loan amount that you are seeking at that time.

I would double check an ammoritization schedule because your balloon payment seems wrong to me. Based on the terms you mentioned, I calculated a balloon payment of approximately $326,500 at 5 years.

In addition to the answers you have gotten, you have the option of using some of your own money along with raising OPM to increase your yield. We have a fund established that we lend from. We give our investors a great return and we make a spread in interest rate and origination points. I'd be happy to talk offline if you would like more details. 

You may want to consider a cashout refinance before you move to get your equity out. It will be much harder afterwards since it won't be your primary residence.

It would not be a gift. It's a loan that should be secured by the new property or an existing property. 

It is called a "participation loan" and you need to make sure there's language in the note describing the participation as well as drafting a mortgage with default terms and the lenders rights.

Even though they are family, be sure to secure their money with a properly drafted note and mortgage, property insurance listing them as lenders, and lenders title insurance policy as well. This is the same protocol you should use with anyone who is willing to lend to you.

I purchaes property subject to the sellers note/mortgage, or seller financing with very little to zero down, or Masterlease, or ggt an Option to purchase later which sometimes has a leasing component mixed in. These strategies can all be done with OPM too.

Here's an example from yesterday. 

I'm buying a house subject to a 67k loan with $771 PITI payments. It will cost me 7k to catch up back payments and close on the house. I need another 15k to update and repair it. My friends IRA will give me the money needed and in return I will give him 6% interest plus a piece of the equity someday when we sell. That piece is up to you to determine what is acceptable. I give 10 to 20% to my financial friends.

We will rehab and the lease option the house to our end buyer for 2 to 3 years. This particular house will likely clear 30k profit. And I'm all in for $0.

There's many additional ways to structure your deals. Check out cashflowdepot.com. its my favorite site for creative deal structuring. My friends, Peter Fortunato, Dyches Boddiford, David Tillney, and Bill Cook are all featured there and they have taught me so much over the years.