"Subject to" REFINANCE-bad credit - Posted by Anthony - CA

Posted by Anthony - CA on February 04, 2004 at 19:28:48:

Thanks for the follow-up. Yes, I bought this house to live in. I was thinking that in a few years I would sell it L/O style. That way I would get a premium regardless of the market, with a dp in the pocket to boot. It does feel good to be in the game though. It took me about 2 and a half years of educating myself and getting up the nerve to take action, but here I am. I also agree that the axe needs sharpening. Thanks again.

“Subject to” REFINANCE-bad credit - Posted by Anthony - CA

Posted by Anthony - CA on February 02, 2004 at 15:21:53:

I recently just closed my first deal from another investor. Property needs some work, lots of “sweat equity” (me and relatives), but total about 5k work done from outside contractor. Previous investor aquired the property “subject to” from original borrowers and has passed it on to me through the same venue. 1st loan is ARM for 172k starting @ 6.1% and the 2nd is fixed for 43k @ 11.25%. Prior investor originally wanted 20k dp, but after negotiations and bringing to light how much work needed to be done, he grant deeded the property to me for 2k dp and 9k payable within 2years @ 10% in amount of $175.00 per month. By the way, he never “cured” the loan which left original borrowers in jeoprordy of foreclosure because of their delinquency. Also said investor had let it get to the point of being 4 months past due and was out of time. I came in made a payment to bank and bought 30 days (after having it grant deeded to me of course). I fully expect to make another payment within another 7 days to buy another 30 days. It took some time and effort to get the right people on the phone from the bank, but was well worth the effort. I don’t understand why the original investor just didn’t make a payment to buy a bit more time so he could maximize his profits on this property.
My 1st payment towards the 9k does not start for 6 months. Currently the property is worth only about what the loan balances are in its’ “as-is” condition. This puts me at least 9k upside down on equity. Yes, yes, I can hear all of you “pros” asking why in the heck did I accept such a deal not in my favor? Answer: All of my “In-laws” and immediate relatives are in the building trades and can do many of the needed repairs dirt cheap. This is also my first purchase (done creatively I might add) and will be owner occuppied. After said repairs are done the value on this home will jump to between 240k to as high as 260k based on comps in the immediate area and it is one of the largest homes in the area with one of the larger lots. By the way the original loans are only 8 months old. My question I guess is do I have any options as far as getting it refinanced now. Keeping in mind that I have poor credit, but with no foreclosures on it or “BK’s”.

Well, today’s the day! - Posted by Anthony - CA

Posted by Anthony - CA on February 07, 2004 at 08:59:14:

Today is the day I go change the locks on my new house and start the repairs. I want to thank everyone on this site for the input to my posts…strange…it’s kind of a weird feeling going from a “renter” to an actual “home owner”. Kind of scary too. I have always heard the first one is the toughest to get. Now I have done that and my goals have suddenly become a great deal more “Lofty”. Like way up there! You can best believe I will use the materials and information from this site, as well as all of your posts, to help me reach those “lofty” goals. Thanks to all of you - God Bless.

Which First? The Good News… - Posted by David Alexander

Posted by David Alexander on February 02, 2004 at 22:48:02:

Or the Bad news…

I’ll go with the bad news first…

Anthony… You got your clocked cleaned… if this weren’t a property to live in… You’d probably never get out of it alive…

The numbers… by my calcs… are that your in it for 230k plus repairs (which you said were about 20 25k)…

Due diligence… You didnt do any… You need to buy a course or something and learn what you need to be doing before you get yourself into some real trouble…

buying the largest house in an area is typically a bad investment… at least in my experience… your mileage could vary… but, I have several of them that I still have scars from… One I just sold… I had on the market for 15 months…

If You didnt give that investor a note secured by the property… I’d be talking to him… about the deliquent payments… As it stands now… You became his pigeon… He probably walked into the deal for nothing… hence the back payments not made up… He probably made his agreement that way…

You do any more deals like this… and you won’t survive in this business… Not to mention… it sounds like you don’t even have the proper paperwork filled out… No POA, No Loan Authorization… You need this stuff… and it would do you good to get this stuff if at all possible…

Now the good news… You bought yourself a house… and buying a house for yourself… isnt like buying a property for an investment… It can carry some of the same decisions… but, for the most part… You make the money so you can buy what you want even if you pay retail… and in some cases like your more than retail…

The other good thing… is now… you have been exposed to the game… get educated quick… But, no matter the cost of that… (most of the time) it’s worth it… Just to get in the game…

Oh yeah…

One other thing… You said something… about filing Bk as a bad thing…

Your looking at it wrong…

It’s a tool like any other… BK’s were put in place so that entrepreneurs would take chances… build businesses… and not fear failing…

The real and typical failure is when folks lose everything… because they don’t employ the tools around them to straighten things out…

Now, on the otherhand… a large portion of folks abuse the BK system…

I know this as I have had alot of folks file them only to use it improperly… to escape debt…

This wasnt meant as a slam Anthony thing… But, more a wake up… to the deal you just did…

David Alexander

Re: “Subject to” REFINANCE-bad credit - Posted by Rich Hyams

Posted by Rich Hyams on February 02, 2004 at 17:09:14:

I don’t mind the monthly if you are going to live in it while you fix it, you gotta pat somewhere. Did I read that right, you are living in it, right?

How long of a rrehab? If you can get the work done in two months or less, start trying to sell it in a month, you may have it sold and closed in four or five months, and additional 8-10k plus taxes and insurance and utilities in holding costs, as long as the area moves nicely, you have some Ks there.

You need to have a rapport with a bank and a mortgage broker. A mortgage broker can give you examples of rates, downpayments and monthly payments to use in ads and on flyers, tell one that you will put a stack of his cards, and his phone number to call for finance details on you flyer with the payment examples. Ask about you worthiness, see is the closing costs are worth the reduction in the payment for you expected holding time. I am sure you will find someone to do this for you at no charge and even give you a few hundred bucks if you buyer finances through them.

Re: “Subject to” REFINANCE-bad credit - Posted by tom kirby

Posted by tom kirby on February 02, 2004 at 16:33:52:

so, what do you expect to pay a month before you get rid of it? about 1,600 or so. Just curious.
Tom

Re: “Subject to” REFINANCE-bad credit - Posted by Randy (SD)

Posted by Randy (SD) on February 02, 2004 at 16:08:39:

First of all congratulations on your purchase! It may not be the most profitable deal done but it’s your first and it sounds like you have a lot of upside potential.

Regarding refinancing at this point IMHO-highly unlikely. For the reasons you have previously stated your $9k upside down, you have no seasoning on your loans and you have less than good credit. Good negotiating skills by the way, going from a $20k down payment to a $2k down payment, if I’m following your numbers year into this property for $224 K. with an ARV of $260 K. so your LTV would certainly allow refinance once most of the work has been completed.

I am not seeing it… - Posted by Stan (Atl)

Posted by Stan (Atl) on February 02, 2004 at 16:02:31:

You say that there is alot of sweat equity to be done, but right after the comma say it equals to about $5,000 if an outside contractor does it. I am not following that. I just do not for the life of me see how you can spend $5,000 worth of work and improve the house by about 45k - 50k in value. Just me.

Re: Which First? The Good News… - Posted by Anthony - CA

Posted by Anthony - CA on February 03, 2004 at 09:51:46:

Hey David, thanks for the input. I must point out however, that you didn’t read the numbers correctly. It would be about 20k to 25k for repairs if MY FAMILY AND I DID NOT DO THE REPAIRS and hired outside contractor. The only thing we are going to hire out for will cost me about 5k. ALL THE OTHER WORK I am doing myself. So no, I don’t think I “got my clock cleaned”, as you put it. And for further information David, I have educated myself on REI, I have studied courses and books. Thanks for lookin’ out though.
Curious? I do hope that you pay closer attention to detail when you are constructing YOUR deals, or you may find that YOUR clock will be cleaned. Just my opinion, I could be wrong… :wink:

Re: “Subject to” REFINANCE-bad credit - Posted by Anthony - CA

Posted by Anthony - CA on February 02, 2004 at 17:38:14:

Thank you to everyone for all the response. To those whom have asked, yes, I will live in the property. For the others on property value. This particular property went up in value, from the same time last year, approximately 20%. This is due to the bubble that burst in the silicon valley of CA. The property is approximately 60 t0 70 miles from the tech capital of the world. What has happened is that those lucky people still with jobs have opted to take a longer commute, about 1.5 hrs, in order to be able to buy a house. The tech area median price is 480k to 500k and you can’t find a “friggin” fixer for less than 400k unless it should be condemned. Now weigh that to traveling 1.5 hours and housing median is roughly 200k. Now all potential home buyers (unless they are stupid rich) are driving the distant housing market, up, because they are trying to beat getting priced out of the market, they are willing to do the commute so they are moving further out into the valley.

Re: “Subject to” REFINANCE-bad credit - Posted by Rich Hyams

Posted by Rich Hyams on February 02, 2004 at 17:14:01:

I saw your post, you are living in it, its a great deal if it somewhere you want to be and a really great deal if you plan to be there awhile.

Congrats

Re: “Subject to” REFINANCE-bad credit - Posted by Anthony - CA

Posted by Anthony - CA on February 02, 2004 at 17:07:00:

I don’t plan on getting rid of it. It will be occuppied by my family and I. $1600 per month in my situation is EASILY affordable. However, this was not always the case. When all the “dot-coms” out here in CA dried up and blew away, my wife and I were financially devistated. We have since turned things around, but I refused to wait for credit to catch up before buying my first home. I also refused to file BK. Call it stubborness or stupidity, depending how you look at it. I just felt filing BK was “quitting” even after people said that I should.

Re: I am not seeing it… - Posted by Randy (SD)

Posted by Randy (SD) on February 02, 2004 at 16:11:46:

hey Stan, I read it to mean that in addition to the sweat equity done by him and relatives there would be an additional $5000 worth of work done by a licensed contractor…

Actually, I didnt read it wrong… - Posted by David Alexander

Posted by David Alexander on February 03, 2004 at 11:01:09:

You have to understand my personality… unfortunately… for the prose to come out… I’m happy go lucky… opinionated… and NoNonsense… Others that have been around awhile can attest to that for you…

It wasnt meant as a slight just to help you…

Here’s the rub… It still needs 20 - 25k work whether you do it or your family does it…

If it werent a property for yourself… and this were a business… is your family going to do the work for FREE everytime… that might get a little old…

When buying RE as a business investment… the top 10% is Air… So if the property is worth… 260k… then… take 26k right of the top… for other expenses…

I had not even mentioned… as Kawika did… the holding costs…

Now with that said… do I recommend… folks buy RE at any cost… if they don’t know the difference… Absolutely…

If you try and sell this thing… in the next few months… even with the FREE labor… You’ll be lucky to come out even…

Again… not to make you mad… just to help…

David Alexander

“The More Opportunities You Create for Yourself the Less it Matters if you Miss One”

Re: Which First? The Good News… - Posted by Kawika Ohumukini

Posted by Kawika Ohumukini on February 03, 2004 at 10:44:16:

Hi. I think David’s point, although with far too many “…”, was that this really wasn’t an investment. It was a lease/option purchase for your residence. There is a big difference because you’re living in it.

Counting on appreciation to make the deal is very risky mainly because there is a cost of ownership, namely all those loan payments you’re making + taxes + insurance. So as time goes by those payments will likely eat away a lot of the appreciation on a dollar-to-dollar basis meaning that the more dollars you have to payout to hold the property, which is directly related to the length of time you’re in the property which is indefinite, the lower your ROI.

He probably could have said it better, and shorter, but his basic premise is sound.

Re: “Subject to” REFINANCE-bad credit - Posted by tom kirby

Posted by tom kirby on February 02, 2004 at 17:24:43:

Go get what is your! Good Luck, the best.
Tom

Re: I am not seeing it… - Posted by Anthony - CA

Posted by Anthony - CA on February 02, 2004 at 16:56:39:

Exactly Randy.
Most of the work to be done by myself and relatives. The 5k mentioned is for a separate contactor to do additonal work that will be done. If all of the work were to be contracted out, it would be closer to 20k to 25k. Funny thing is 90% of the work is cosmetic, but contactor rates in CA (bay area/silicon valley) are through the roof as are costs of homes. As an example of cosmetics: I am puting Limestone down on 1st floor high traffic areas and 2nd floor bathrooms. Limestone is better quality than tile and more expensive. It really doesn’t need it, but my wife has this thing about floors and refuses to move in until it is done. Not to mention my sister-in-law works for a major tile company out here so I am getting it FOR FREE. Also her husband “lays tile” and is going to do it for free if I help him. There are also some moderate plumbing and carpentry issues which again my family and I can handle readily. So you see, for me, the benefit is that I am now a HOMEOWNER with some equity, after repairs of course. Let me say though to all you NEWBIES, keep reading from this site. The situations change daily and it won’t be long before you gain information that is tailored to your specific needs. May the LORD-Jehova bless all of you. MAN, I CAN’T BELIEVE THIS, BUT IT ACTUALLY WORKS, IF YOU PUT FORTH THE EFFORTS…LA LA LA LA LA LA …I AM SOOOOO HAPPY!

Re: Which First? The Good News… - Posted by Anthony - CA

Posted by Anthony - CA on February 03, 2004 at 18:09:45:

Maybe I miss the point. I am still learning. Also I got this property “subject to” not L/O. The comps say that “like” properties in the neighborhood, that don’t need any work of course, are about 260k. I don’t know if you or David read all of the ongoing posts on this particular topic, but there was a great deal more to it. I hope you and David don’t think I am angry…I am not. I know that you two are merely pointing out ways in which to structure deals that would be more benefitial. True, this one probably won’t make me a huge profit at least not one that I am sure you are used to. If you read back through previous posts you may see that this deal was more than just profit for me. Again, thanks for the input.

You bought a house to live… - Posted by David Alexander

Posted by David Alexander on February 04, 2004 at 17:35:09:

Creatively… One where you’ll likely make a ton o’ money on in the future… I just wanted to point out some places to sharpen your Ax on…

Believe me… I’ve done more than my share of No No’s… and costly ones to…

The house you bought… to buy and hold to live in… Awesome… as long as it’s what you wanted…

Just don’t make a business out of it…

Couple years sell it for a Tax free gain… of whatever is on the table… or after you get tired of it… rent it out for a year and then sell it…

Your in the game now…

That’s a good thing…

One of my first deals… I bought… I though thought the property was worth 75k… I thought the seller owed 48k… I thought the interest rate was 8%…after I inked the deal… it turned out it was only worth 65k… the seller had signed another agreement with the mortgage company… and 54k with 12% interest was owed… and I was off by 10k… it was worth… 65k…

I still have that property… it’s worth 85k and I owe… about 48k… Not a grand slam… but, time healed this wound…

You just have to make what’s going on…

David Alexander

Mortgage Refinance provide you fiance at bad credit and you get refinance at low interest rate and according to your need.