Investor · Eastpointe, MI · Member since 2015 · 13 posts · 2 votes
What's up family I have a little issue going on right now and hopefully I can get a little feed back and ideas, ok I found a nice 3/1 brick property he was asking 26k but got hime down to 13k I put the earnest money down now I have 2 weeks to close but I don't no how I'm going to come up with 10-11k
By me just getting married at the beginning of this year we emptied out our savings down to 3k so now my issue is I'm needing help to find money for this deal
In order to give any advice, it would be very useful to know how much the property was worth as-is, fixed up, and how much it was going to cost. How much of a discount that you received off the ask price is somewhat irrelevant and often misleading, as the house may or may not even be worth 13k. It would also help to know what you intend to do with the house, as if you're looking to flip it, the financing options may be different than a buy and hold.
If you don’t have all cash in the form of savings and/or liquid securities, you are still eligible to pay all cash in the seller’s eyes. The bank just needs to do its due diligence on you before the offer, which is why it helps if you’ve been a long-term client with the mortgage institution. Due diligence includes the last two years of W2s, last two pay stubs, all brokerage accounts, all CDs and savings accounts, understanding all liabilities and assets, your credit score and credit history, the likelihood that you will continue to remain employed or receive income after financing, and financial track record with the institution.
Banks want to continuously make money through an interest rate spread, and offering a no financing contingency option helps them win business, especially with the refinancing market down over 75% YoY.
I plan to use the no financing contingency strategy for properties I absolutely love that I could pay in cash by liquidating stock and bond holdings. Paying 100% in cash is a last resort because of the sub 3% financing I’m being offered. The other good strategy is just not even write no financing contingency in the offer, but to write “all cash,” and then get financing with the bank if you know they have agreed. I do not think tying up most of your liquidity in property is a good idea. stay diversified.
From the bank’s point of view, I’m a riskier borrower as an entrepreneur compared to a W2 earner. But from my point of view as an entrepreneur, I’m less risky because I’m living in risk already and thriving. I can’t get fired unless I fire myself. Besides, my total compensation is structured so that I have a strong safety net because I have passive income, contracting income, deferred compensation in the form of W2 income, and entrepreneurial income. We all know that there’s no job security anymore anyway.
If you’re looking to buy a property in a hot market, don’t forget to remind yourself about the great housing crash of 2007-2010. If you’re buying in a non-prime location, far away from a major employment hub, then be prepared to lose 50%. If you’re buying in a prime location, then still be prepared to lose 25%. Getting in a bidding war based on emotional desire is a losing proposition. You must have a base line number where you are willing to walk away.
Over the long run, I think most property owners will be fine. It’s the short run which can really do a dozy on homeowners if they have to bail during a correction. I’m looking to buy a new home to live in and rent out my existing home to unlock some cash flow. If the properties appreciate in value – as I think they will over the next 10 years – I’ll be happy. If they don’t, then I’ll at least have created fond memories.
In order to give any advice, it would be very useful to know how much the property was worth as-is, fixed up, and how much it was going to cost. How much of a discount that you received off the ask price is somewhat irrelevant and often misleading, as the house may or may not even be worth 13k. It would also help to know what you intend to do with the house, as if you're looking to flip it, the financing options may be different than a buy and hold.