Problem...What to do?

Question

Trying to get into real estate.  I rent/live in a duplex for about 5 years.  I'm in Wisconsin and my landlord lives in Florida.  He has been selling all his properties this year in Wisconsin because of the distance for him.  He wants to sell me the duplex I live in.  There is a long term tenant that has been there for over 7 years paying 850/month.  My landlord wants to sell me the duplex for 160k...If I don't/can't buy it he will put it on the market for 185k which seems fair based on the housing prices in the area.  I have been trying to get a loan from various banks/credit unions but none can help.  Darn 50k in student loan debt! I have fair/good credit. I I want it bad and can afford it but I'm not given the chance.  Any other routes I can/should try?   Thanks for taking the time to read my issue and any suggestions you might have.

Account Closed · Answer

Do you know if he happens to own it free and clear?  If so, you might be able to come to some sort of seller financing agreement.  I am VERY new to the investing world but this is a option we may be using in the near future with our neighbors house.  I am still educating myself on the subject but it sounds like it can be a good option for getting around a traditional loan if he owes little to no money on the house.

Nate Lindquist · Answer

Ask if the seller would finance.  You could offer him favorable terms (i.e. high interest rate, large down payment), with the mutual understanding that you will refinance with an institution as soon as you are eligible.  It would potentially help both of you out by getting him cash now, steady cashflow from your monthly payment, and you get your foot in the door to the real estate world.

Derek Dombeck · Answer

Don't pre-judge what the seller will or will not do. If his biggest motivation to sell is based on not wanting to be a long distance property manager, and not money, he may be very willing to seller  finance for awhile.  If you don't ask, you don't give him the opportunity to say yes. And as a current tenant,  you have been building your credit with your landlord assuming you have been a good tenant.

By the way, I feel he's asking to much based on rents coming in.

Happy Investing

Derek Dombeck

Marcus Auerbach · Answer

@Quantell Booker be careful:

my hair stands up when I think about partnering up with a tenant, that has bad idea written all over it. Most likely your neighbor does not have an investor mindset - he wouldn't be renting for 5 years.

The ratio of $850 rent to $160k does not seem right. For  2x850  rent the price seems very high. You can PM me the address, I can tell you what I would pay. If he puts it on the market he will pay 6% in realtor commission, that's 11k. Plus he's not going to get asking price based on 850 rent.

Your student loan should not keep you from qualifying for a personal residence. I assume there are other reasons that ad to the total picture. Your bank owes you an explanation if they turn you down. Don't forget to count both security deposits to your down your down payment.

If you want to buy it and you can confirm its a solid deal make an agreement with him and ask for some time. You could sign an option to purchase. In the meantime get your credit cleaned up and think about how you can earn some extra bucks to get the down payment saved up.

By the way, as an investor your goal is to buy below fair market value and not full retail.

Good luck.

Brandon Chin · Answer

Please also think about your scenario from a broader perspective.

a.) Perhaps you do not qualify for a legitimate reason, too much debt or low credit requires due diligence on maintaining a good credit.  Is now really the best time to purchase a home?

b.) What are the chances you have landed on the exact opportunity in your market that makes the most sense?  Chances are there are other houses on the market that would be able to fit your criteria and possibly could be better deals.  Make sure that you aren't doing a knee jerk response to a quickly presented deal.

c.) If you truly think this is the big deal, then be sure that the mortgage terms you'll eventually be accepting would truly make sense according to your income level.  It sounds like you'll have to look at alternative forms of mortgages perhaps due to the debt-to-income ratio.  FHA is an option however, I believe it is no longer the best form of mortgage due to the PMI existing for the length of the loan.

Maggie Gasner · Answer

Don't assume the lenders are looking into FHA for you.  Do your due diligence and don't give up.  https://apply.fha.com/myhomefha/?PPCID=106&CID=&gclid=CNamvPnk9sUCFYgAaQod5SMAVg

Quan Booker · Answer

No he doesn't own it outright.  He owes a little over 90k on the property.  I was thinking about seller finance but since he didn't own it outright I didn't think he could so I didn't ask him.

Quan Booker · Answer

Haven't thought about going into a partnership with the other tenant.  Doesn't seem like too bad of an ideal but definitely not something I had in mind for my first property.

Quan Booker · Answer

Yeah I have tried Credit Unions.  No I don't have 20%.  I have closer to 5%.  I have assumed the lenders I went to tried FHA.

Gilbert Dominguez · Answer

If you can't buy it on your own perhaps you can offer the deal to the other tenant as a joint venture between you and them. This way at least if they have the credit you can both own the building you live in, share the equity the current owner is willing to let you have. Would that make sense to you?

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