Must be some friend! You’re going to pay out of pocket $5k to buy a property that produces no cash flow and have no intentions of raising rents because of your friend.
Why not just flip a few properties, hand your friend $5k to move into a place they can BUY and then rent or owner finance the property for cash flow? Either way you would be giving your friend $5k.
What about selling to your friend for $55k and make a nice cash flow? Wouldn’t he/she gladly pay more if they were BUYING vs. renting?
What about flipping your few properties, put the $5k down on another property your friend can afford and split all future equity? Then take over your parents payments on this one and rent it for positive cash flow.
Ok here is the deal in a nut shell. My folks own a peice of rental property renter occuipied, all they want is the payoff of the loan which is arond $32,000; The going rate for the house is $50k-55k.
I have little money for any down payment; and I was think I would have my mortgage company GIVE my folks the 55k and they would just in turn give me back the diffrence to cover my cost; actually if my mortgage company requires 10% Downpayment…they would be cutting them a check for 49.5k
inturn they would pay 32k of that to pay off the loan and give me the balance…like i mention earlier.
Do you think this is the best way of doing this? If so how will I go about the DP…($5500) ; If they are going to give me $17.5; Practically right at closing; wont my mortgage company need to see a Cashiers check or something from me showing I am putting up the funds from my own bank account?
What should I do so can I take out the max amount out in cash when the smoke clears. I want to use these funds to buy and sell some fixeruppers…
One other thing does anyone have a SAMPLE Purchase Contract? they could just post and ill cut and paste…
If your parents are willing to refi to pull the $55k out and pay off the existing loan, then give you the difference, then why bother with going through all the extra hoops? Just have them refi and pull the cash out, then you just take over their payments. You wouldn’t need a down payment.
A few comments from your post. First off, you might get more responses with a better title to your post. We are not " BIG SHOTS " here. Your title comes across wrong.
Next. I wouldn’t be making offers on property if I didn’t have a purchase and sales agreement in hand and further didn’t have an agreement that I didn’t know word for word or didn’t feel comfortable with. In your case you don’t have a purchase and sales agreement.
Sure the bank is going to want to see proof of your funds for the downpayment. If they require 10% down, you will have to show them $3,200, not $5,500.
What you are trying to do with the bank in my opinion is bank fraud. You are really buying the property for $32,000, but telling the bank that you are buying for $55,000. Does the bank know you will be getting a big kick back at closing. And you still have not addressed the banks down payment requirement.
You say you want to take out " the max amount of cash " after closing. Before you do that, does the property you are buying cashflow if you end up taking this max amount of cash out. Remember this is not free cash. You will be paying interest on your cashout. Do you have the cashflow to support this.
All questions that you will have to get answers to, to keep yourself out of trouble.
But if you read my post a little more carefully I said Im buying the house from my folks(parents) I know I have to “formally” right a sales contract; but I’m not to concerned about them changing the amount they really need for the home…
Like I mentioned in the post…If I tactically say I am buying them home for $55k then 10 percent of that would be $5500.
I never thought that this would be illegal in anway…I figured “creative financing” ;
What do think I about making the contract state something like…Downpayment in the form of a note given to seller? like say $500.00 Down…$5000.00 due to seller in 12 month intrest only payments lump sum due at the end of twelve months?
thx for your help…
P.S I meant “BIG SHOTS” as a Compliment not an insult.
At the closing you will have to sign a HUD=1 form which outlines where every penney goes in this whole transaction. If there is money changing hands which is NOT listed on the HUD-1, then this is bank fraud. How important is taking out the cash? If you can do without the cash, why not buy the house from your parents “Subject To” the existing mortgage. Basically speaking, they deed you the home via a trust, and you start making their mortgage payments. If you still need the cash, then sell the home to a retail buyer or sell it on lease option to a tenant buyer. When he cashes out you’ll have good money, and in the meantime you’ll have good cashflow.
I hear ya…but the tenant only pays 400.00 a month which allows a break even cashflow with a 32k note. I dont want to sell the property because a friend of the family is renting it. I’m not going to raise the rent either.
How bout this one:
On the sale contract I do a “Good ole fashion Carlton Sheets Move” I say the purchase price is
55k; which I will put a Downpayment of $5,500. $500.00 due at closing and the $5000.00 in a prommisory note at 10%. Intrest only payments for 12 months with the lump sum of %5000.00 plus intrest due at the end of the 12 months! (this came to me in my sleep)
That way the d.p will be coming out of my pocket and by te end of the twelve months I would have no doubt flipped one or two peives of property so no big deal on the 5k!!!
Plz let me know what you think. I certainly dont want to do anything under the table with my first deal.