All Forum Posts by: Derek Dombeck

Cashflowdepot.com is your one stop for it all.

When dealing with an older seller, you should point out that your payment would still continue to go to their heirs in the event of death. That's comforting to some of them. 

Seller financing does not have a standard balloon payment of 5 years or any other standards for that matter.  It's all in the negotiation. I typically structure an  extension right away in the event of a balloon after several years. I simply ask the seller, if for any reason, I could not pay off the balloon, do they want the house back? They almost always say no. Then I offer them an additional principal payment like $5,000, to get an extension for 5 more years. I may also offer to increase the interest rate a bit too. My point is, you can structure anything you want. I haven't used a bank for an investment deal in 10 years and I have no desire to do so.

If they are asking you for large amounts of upfront money or fees, be suspicious. Get references from them and call them. Make sure all money goes through a title company or an attorney. That should keep you safe

We are looking at staying in median price point homes and we will stay away from non conforming or odd deals. Currently, we have not changed our terms. We have always capped our LTV at 65%  of ARV, which is where we plan to stay. Many of our friends, that are lenders,
are dropping to 50% LTV, but they are in more volatile markets than we feel we are. I think you will see rates go up and LTV'S  come down in the next few months.

Another option is to purchase the entity that holds the property right now (assuming there is one). If you buy the entity on terms and possibly leave the sellers in as 5% owners, with a buy out agreement in 2 years, 
the bank would not have a new payor on the account, therefore, no due on sale. The challenge would be to make sure they don't have any bad debt, judgments, or other skeletons in the closet under that entity because you would be taking responsibility for them. Also, your depreciation and tax basis in the property would be affected.

I would suggest you learn everything you can about creative deal structuring and buying subject to, as well as lease options. These strategies are going to have alot of opportunities as this pandemic subsides. You should not need a bank loan if you learn better methods. Send me a direct message and I can give you some good sources for education.

Shop around with other banks and take the best deal you can find. You likely want to stay with small banks or credit unions right now though. 

What he is saying, is your deal with your lender was made when you borrowed the money to flip the house. The fact that your buyers can't perform has nothing to do with your agreement with your lender. If you agreed to pay points, fees, and interest on your loan, that's business. I run a lending company. We try to work with our clients through their challenges because the last thing we want to do is foreclose. BUT, at the end of the day, we have a business to run and families to feed too. Call your lender and have a conversation. I suggest you not use the words " I feel" in that conversation.

Yes, some credit lines can be frozen and or called due and paid in full. You need to read your loan docs. Many people found this out the hard way in 2007. If you are concerned, take out what you need for operating reserves and put it into an account in a DIFFERENT bank. You should not leave it in the same bank as they may be able to pull it back out of your account. It happens.