First creative finance deal

[Tristian Kwon]

Is there anyone that could review this creative finance deal for a 4/5 unit property and provide any feedback? My VA loan fell through and need to find alternative funding ASAP please help.

-Buy the property for 715k (It appraised for 700k)

-325k loan on the property with 390k equity

-SubjectTo Finance the 325k and take over the mortgage/deed

-Seller finance the 390k equity at 0% interest for 2 years and 6% interest for 13 years with a 20k down payment paid over 6 months. (The 2 years allows me to house hack for free since I am stationed here for 2 yrs

Pre-context:

-VA funding fell through at appraisal because he had non permitted renovations and was using the property as a 5 unit

PM me for more info

Thank you!

[KC Pake]

Quote from @Tristian Kwon:

Is there anyone that could review this creative finance deal for a 4/5 unit property and provide any feedback? My VA loan fell through and need to find alternative funding ASAP please help.

-Buy the property for 715k (It appraised for 700k)

-325k loan on the property with 390k equity

-SubjectTo Finance the 325k and take over the mortgage/deed

-Seller finance the 390k equity at 0% interest for 2 years and 6% interest for 13 years with a 20k down payment paid over 6 months. (The 2 years allows me to house hack for free since I am stationed here for 2 yrs

Pre-context:

-VA funding fell through at appraisal because he had non permitted renovations and was using the property as a 5 unit

PM me for more info

Thank you!

Hi Tristian,

Your creative financing deal looks interesting, but there are a few points that you might want to consider or clarify further:

1. Property Appraisal: Since the property was appraised for $700k and you're buying it for $715k, you're already $15k over the appraised value. This might affect your equity position and future refinancing options.
2. Subject To Financing: Taking over the existing $325k mortgage is a common strategy, but make sure to thoroughly review the terms of the existing mortgage. Some lenders have clauses that could trigger the due-on-sale clause if they discover the ownership transfer.
3. Seller Financing Terms: The seller financing terms seem favorable with 0% interest for the first 2 years. However, ensure that the transition to 6% interest after 2 years is manageable with your projected cash flow. Have you run the numbers on how this will impact your finances in year 3 and beyond?
4. Non-Permitted Renovations: The non-permitted renovations and use as a 5-unit property are significant concerns. These could lead to issues with zoning, future appraisals, and insurance. It's crucial to address these before proceeding. You might want to consider negotiating with the seller to resolve these issues as part of the deal.
5. House Hacking: Living in one unit and renting out the others can be a great way to cover your mortgage and build equity. Just make sure that the local zoning laws and HOA (if applicable) allow for this arrangement.
6. Down Payment Terms: Spreading the $20k down payment over 6 months can ease the upfront financial burden, but ensure you have a clear agreement with the seller on this timeline and any penalties for delayed payments.

Best of luck moving forward,
KC

[Chris Seveney]

Quote from @Tristian Kwon:

Is there anyone that could review this creative finance deal for a 4/5 unit property and provide any feedback? My VA loan fell through and need to find alternative funding ASAP please help.

-Buy the property for 715k (It appraised for 700k)

-325k loan on the property with 390k equity

-SubjectTo Finance the 325k and take over the mortgage/deed

-Seller finance the 390k equity at 0% interest for 2 years and 6% interest for 13 years with a 20k down payment paid over 6 months. (The 2 years allows me to house hack for free since I am stationed here for 2 yrs

Pre-context:

-VA funding fell through at appraisal because he had non permitted renovations and was using the property as a 5 unit

PM me for more info

Thank you!

 have you asked the seller if they would seller finance and walk away with no money in their pocket upfront and keep their name on the property?