Posted by docniss on June 26, 2005 at 15:44:10:
Thanks for the info, and you’re right about the friend thing too. I have learned over the years to be very cautious. I will make sure that if I do this that the structure is so that I am not screwed over. No matter how I do this if I can buy this house there is a lot of money to made on it at resell. Thanks for the advice.
Financing an Auction purchase - Posted by docniss
Posted by docniss on June 26, 2005 at 09:39:17:
A friend showed me a house that was trashed, he knows I am into REI so he showed me the house and we walked throught the entire thing. Of course homeowners trashed it, but everything is fixable. The friend actually would like to buy the house but has no funds to do so at the time. I have the cash reserves to go to auction and buy this house. Then I would like to get it into a condition that was inhabitable for this man and his daughter so they could move in, finish the work and then sell it, leas/option it to him with his sweat equity as his down payment. My question is how do I buy this house for cash and then get financing on it so that my cash isn’t tied up in this house for a year or two? If anyone can give me a few options then thanks…I am assuming a HELOC is an option but is that the only feedback is appreciated.
Comm’l Note - Posted by JT-IN
Posted by JT-IN on June 26, 2005 at 10:23:50:
I’d suggest that you contact a comm’l Bank, and discuss with a comm’l loan officer the prospect of obtaining a 6 to 12 month note, utilizing the property as collateral. Depending upon the current condition of the property, its needed repairs, its as-is value and you credit worthiness as a borrower, you should find success with this approach.
When purchasing at Sheriff Sale / Auction, many times you may not receive clear and marketable title for as much as a few to 6 months, depending upon where you are located. During this period of time you really have nothing to mortgage, since you essentially have no legal title for a lender to encumber… so make sure you understand the timeline in advance, so you are not surprised in hindsight…
Good luck on it… One more thing… Why are you motivated to assist your friend by facilitating his investment in such a transaction. All too often these generous acts by a friend are left unfulfilled on the part of the sweat equitor… so make sure you protect yourself from any downside here, as well as fully understand what and why you are doing so, as well as a realistic expectation of what may well happen in the end… Simply based on observing many of these such circumstances with investors… Been there, done that… and will do it no more.
JT-IN
Re: Financing an Auction purchase - Posted by Randy (SD)
Posted by Randy (SD) on June 26, 2005 at 10:02:31:
Depending on your friends creditworthiness, the ARV and his purchase price in relation to the appraised value (after repairs) you have several options. A simple and direct method is to purchase the home at auction with cash, place rehab funds in escrow then sell to your friend taking back a note. Once the rehab has been completed and verified by a certified appraisal you have the option of selling your note. Assuming a 3-6-month time period between purchase and rehab completion you have a “seasoned note”, depending on the rate and terms of the note you could expect 90%-95% cash out. One significant advantage is your buyer does not have to qualify for financing in order to cash you out. A second alternative is to sell to your friend on a CFD (contract for deed) after six to 12 months again you have a seasoned contract that can be sold, or he can easily qualify for traditional financing as this is a refi as opposed to a new loan.
Re: Comm’l Note - Posted by Chuck Rosenberg
Posted by Chuck Rosenberg on September 06, 2005 at 11:39:26:
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