How's this? - Posted by Jim

Posted by Jim on April 21, 2005 at 14:52:45:

Yes, I would not purchase until I had a downpayment from an l/o tenant, therefore no vacancy costs and I wouldnt be selling through a realtor because the tenant/buyer would be buying from me. Also, why would I include the 3-4K for minor fixup when I will get that money @ close and it would already be included in the 78K loan, not added on top. So basically all of the costs you named I really think would be a non-issue because of the way I would structure it before I purchased.

How’s this? - Posted by Jim

Posted by Jim on April 21, 2005 at 01:15:40:

Possible Deal…

4br, 1.5ba basement in move in condition. Seller asking 78K. I think he will accept 70K. Thinking of doing 100% financing on 80K and taking 10K back at close. Prequalify a Tenant/Buyer, fair market rent is around 900/month and I believe it can sell for 95K on a lease option especially if I upgrade a few small things with the 10K. So, it would cash flow well even after taxes and PMI and the profit at close seems to be solid. Any advice is appreciated.

Re: How’s this? - Posted by whyK-CA

Posted by whyK-CA on April 21, 2005 at 14:19:37:


I am looking at a somewhat similar situation as yours where a real estate agent contacted me. I am still waiting for more info from the agent, since this is not in my own town. One thing I didn?t think about was getting 100% loan with cash back. (Thanks for giving me an idea!) I was just thinking about 90-95LTV, with getting bigger up front cash from the buyer.

What kind of rate were you able to find in this scenario? (In my case, I?m looking at non-owner occupied, no doc loan, with high credit score.)

If you can share what you find out (loan program and loan broker’s name and number) by posting here or by e-mail, I really appreciate it.

Thank you for your time.

Re: How’s this? - Posted by RichV(FL)

Posted by RichV(FL) on April 21, 2005 at 08:00:57:


That seems thin. Is the seller motivated? Try to negotiate that 70k number down into the 60’s. You need some wiggle room here.


Re: How’s this? - Posted by Jon

Posted by Jon on April 21, 2005 at 07:30:07:

What is their motivation? Why are they selling? What their time frame?

Re: How’s this? - Posted by Dan

Posted by Dan on April 21, 2005 at 06:23:36:

It seems very, very tight.

Most lenders will restrict your closing credit to 6% so that would not
give you your 10K.

Take into consideration prepayment penalties, management expenses,
sales tax and, god forbid, what if something goes wrong, and you
could wind up upside down.


Re: How’s this? - Posted by John

Posted by John on April 21, 2005 at 05:22:32:

Who is a lender that will loan 80K on a 70K purchase?

Re: How’s this? - Posted by whyK-CA

Posted by whyK-CA on April 21, 2005 at 14:25:30:


When you said they would not allow cash back more than 6%, is that a 6% of the loan amount or 6% of the purchase price?

Thank you.


Re: How’s this? - Posted by Jim

Posted by Jim on April 21, 2005 at 08:06:28:

My thought was to make the purchase price 80K and have the seller credit me back money at closing for updating, as much as possible. I dont see how this is very tight if I have a Tenant/Buyer signed to lease the house once I purchase. They would be putting 2500 down as option money and then I would get some money back at close, even if only 6% I would still have over 5K in cash for reserves if there was a problem and they would be planning to purchase. Also, after taxes and PMI it would still produce 200/month cash flow. Also, what is the difference what their timeframe or motivation is? If the house checks out during inspection its just a numbers game, I dont care about motivations and timeframes as long as it works. Maybe im missing something.

Re: How’s this? - Posted by Rusty

Posted by Rusty on April 21, 2005 at 19:16:36:

I think 6% is high, I’ve had lenders tell me that 3% is max you can get credited, and even then there is problems with underwriting.

I would be very, very suprised if they will allow you 10k back at closing on this deal.

(and that is based on purchase price not the loan)

Re: How’s this? - Posted by JASON

Posted by JASON on April 21, 2005 at 10:53:09:

Poeple are just asking cuz it may give ua better way to structure the deal. 78k, probably 3k closing costs, maybe more if u can gett 100% financed with 6-10% cash back, that puts u around 81,82k, 3-4k to fix up those little things = 84-86k. Two or 3 months with nobody renting equals another 2k , so u could be as high as 87-88k, with a resale of 95k thru a realtor, at 7%…leaves u 88.5k. That’s why it’s thin.

You COULD sell w/o a realtor or l/o, you COULD have zero % vacancy, you COULD fix it up for just a few bucks (dunno what it needs, but its good to have reserves for furnace,hot water, roof,plumbing,etc). sO, you COULD make out just fine with a few grand in ur pocket. It’s up to u tho what u want out of it.

If u wanna cash flow 200 plus sell in a year for 3k, then ur good to go.

Make sure u have a good lease written, down pymt in hand before u close that’s all.