Refinancing a property bought all cash in Springfield MA

[James Denon]

I am buying an old home in Springfield MA. It is a 3 family built in early 1900s. It is fully occupied with good cash flow.

Here are the attiributes:

-No certificate of occupancy

-No lead certs

-There is an open permit for the roof but the roof looks fine.

-There i some knob and tube wiring in the basement.

I am buying it for all cash. There was a competing offer with an FHA down 3.5% loan $30K more than mine. The seller wanted to close quick and not deal with FHA appraiser nitpicking on chipping paint at the outdoor stairs and couple of knob and tube wires in the basement.

After a few minor cosmetic updates, I think it is worth $35K more than what I paid for it. Does anyone know a local lender or credit union in Massachusetts who will give the loan based on the appraised value? I would like to be at 80% LTV ideally without waiting for the seasoning period. I believe Fannie Mae and Freddie Mac backed loans do require the seasoning period.

Any reason, I would struggle to get a conventional loan with the above conditions like lack of certificate of occupancy OR cert for lead OR open permit? Any other reason?

Also, I would like to buy the property under an LLC. When I try to cash out refinance, will I have to put into my name and after I refi put it back into te LLC?

Thanks in advance for the help.

[John Menton]

I've had good luck with Digital Federal Credit Union 

[Mike Koprowski]

Hey @James Denon, have you already closed on the property? I may be missing something in your description or maybe I just don't know the entire story. 

Are you purchasing this as a flip or BRRRR project?

Please understand that I only bring the following points up because I think there are some more questions that need answering.

- no certificate of occupancy?? That's kind of HUGE man, a red flag that would stop me in my tracks. The CO tells you everything from the class of property and approved uses to whether or not it's been built to code and is safe for habitation. Technically you cannot live in a home without a CO,  you can possibly get fined or even sued by the city for not having one. 

-I'm not positive on the K&T wiring, it's still pretty common to find it in our area  but I have been hearing that insurers won't underwrite on the property if it's present.  I'm currently rehabbing a 3-fam and getting rid of any K&T I find.  How's the plumbing? If the electrical hasn't been upgraded its possible the plumbing hasn't been either.

- the lead certs aren't a deal breaker but you need to be familiar with the lead laws here in MA.   Are any of the current tenants children under 6 years old? If so it's going to be trouble, and if you try to avoid renting to families with young children your getting into fair housing violations, it's a fine line to be walking. The chipping paint will also be a red flag for your insurance company. 

- do you know the story on the open roof permit? What was the problem? Why hasn't it been closed out? If the roof is fixed all it takes is a quick visit from the building inspector.  You could go to the city and ask see permit to find out what repairs were listed when the permit was submitted and that could give you better clues to find out if the problem was fixed.

Did or are you get a home inspection?

Do you "think" or KNOW it's worth 35K more than you paid for it? Does that factor in any rehab or repair costs? I've been listening to the BP podcasts constantly and one of the MANY things the stress heavily is to know your numbers.

Lastly, I find it a little weird that the current owner would be telling you about the great offers he's been getting but he's choosing you, the cash guy because he doesn't want to "deal" with FHA inspectors. The way I see it, inspectors are there for our own good. Sure, they can be a pain in the a$$ sometimes but it could be a clear indication of a bad deal... Kinda seems like the owner doesn't want to deal with ANY inspector ever, hence the open permit and no CO and no lead remediation certs..

Like I said at the beginning, I don't know the whole story and possibly someone with far more knowledge than me will chime in and say I'm being too conservative which would be fine with me.  All these problems are solvable,  like most things, its just a matter of money.  Good luck, hope you get those answers.

[Bob Couture]

Hi James,

I operate in Western Mass and use the following lenders, but on the commercial side.

Florence Savings Bank (you will need lead certificates though)

Country Bank

LUSO Federal Credit Union

Monson Savings Bank (have not used them yet, but have heard good things. They don't like Springfield though)

[James Denon]

@Bob Couture , @John Menton , @Mike Koprowski

Thank you for your help. I closed recently all cash.

Would you be able to send me your lending officer's name for these banks?

Do you have any experience with these lenders financing based on the appraised value? I would like to be at 80% LTV ideally without waiting for the seasoning period.

[Bob Couture]

Start with Rick Kowal at Country Bank