First Deal - Should I Walk? - Posted by DaytonaNative

Posted by Ray S(FL) on December 18, 2001 at 15:44:16:

What exactly are you trying to accomplish from this deal? You stated in your post that you have a partner? Partnerships, at least in my opinion, are to be between two people with different resources coming together for a comon goal. ie. Your partner has money, credit, or both and you have knowldege as to finding deals and creative financing. It appears that you are partnering with someone with the same financial situation that you have.

Also, what and where is the deal in all of the numbers? Are you paying full purchase price for the property? What are your investment goals for this investment? To have a property with positive cash flow? Please don’t take offense to my questions, I am just trying to get a little more information.

One thing that comes to my mind is having the seller create a note for the first and sale the note for cash at closing. That would give the seller a lot of his cash and he could hold a second for the majority of the balance owed him. You would need to come to closing with 5% of the purchase price and probably some closing costs but, you can negotiate the closing costs. That is one way to get the transaction closed. I have done this before with sellers who want to cash out. Contact Edd lay at Pinn Bank. His number is 888-238-8413. He can give you a quote over the phone about his services.

Hope this helps,
Ray (S)FL

First Deal - Should I Walk? - Posted by DaytonaNative

Posted by DaytonaNative on December 18, 2001 at 15:17:29:

I posted first on the finance forum, but realize that there are many who don’t go there. Please forgive the dup!

Long story, but we really could use advice.

My partner and I have been searching for our first investment property for a couple of months. We’ve finally found a nice little Single Family on a large lot.

We approached the mortgage company as we were looking and applied to be prequalified. We were just recently rejected due to lack of cash, credit scores (mine has decreased significantly due to excess credit pulls) and income to debit ratio. We had planned to have the seller hold a 20% second on the deal - the lender said that we had to show that we COULD pay the 20% if we HAD to - we couldn’t at the time. I have just pulled from my home equity line of credit and thrown it in the bank for “show of cash” and we plan to reapply immediately (to the same or different lenders - through the same mortgage co). I really can’t shop around because of too many pulls on my credit.

Today, we reached a deal with the seller that shows a nice positive cash flow - however he is asking for a $1,000 unrefundable earnest. This is fine as we fully expect to go through with the deal AS LONG AS the mortgage comes through. But, with just being denied once, I am nervous about putting the $ out there.

After explaining all this to the seller, he offered (to my surprise) to hold 75% for 30 years at 10%. This would be wonderful, quick and easy. BUT, the numbers dont work out at this interest rate.

I spoke with Ed about this last week and he suggested that I ask the seller to refinance and I pay on the refin, but he isn’t interested in this - however he is open to other creative methods.

Property is in a good neighborhood - very well kept - ready to rent. This deal is driving me crazy - any advice?

If lender holds mortgage:
SP: 75,000
80% for 30 years at 7 5/8 (approx)
20% by seller for 15 years at 10%
Will rent at 860 / month

If seller holds:
SP: 77,000
75% for 30 years at 10%
10% cash
10% - have to find somewhere - hard money?
numbers just dont work

Please help!

Daytona Native

Re: First Deal - Should I Walk? - Posted by Shawn (MD)

Posted by Shawn (MD) on December 18, 2001 at 15:44:32:

I am a newbie and probably shouldnt get involved but just eyeballing the numbers it doesnt seem like you can be cash flow positive on $860 / month with either deal. Don’t forget taxes, insurance and maintenance.