Father in Law is Trying to purchase 8 acre property to expand 30 year business. Please help!

[Tabia Augustin]

Hello Everyone,

Any input is appreciated.  My father in law has owned a full service auto repair shop and used car dealership for 30 years. It sits on a one acre property. Recently the lot next to him which is 9 acres went up for sale. On the property is a house that is estimated to be worth 160,000. It is a 3 bedroom two bath and does not need a lot of repairs. He was told it should have an after repair value of 228,000. 

Here is the dilemma. The land and house was put up as an estate sale at an auction. He was able to win the bid and now needs to secure the financing. His credit is less than perfect (he filed bankruptcy 10 years ago) and thus will not qualify for a mortgage. He is trying to get an FHA loan but it may not be approved in time. Should he just let his deposit go?( the deposit was 30,000).

For a situation like this what is the best approach since he wants the land to expand his business. If it helps for detail the house sits at the edge of the property so in between the house and business sits 8 acres. 

[Jon Holdman]

A bankruptcy 10 years ago won't prevent you from getting a mortgage.  Ten years is more that enough time to recover from a bankruptcy so if there are still credit issues, there's more to the story.  Water under the bridge now, but he definitely should have had financing lined up before laying out $30K.  I don't think you could ever get any conventional loan to close in three weeks.

FHA would require he move into the house.

Hard money might be a possibility. Get a hard money loan to complete the purchase, do a subdivision on the property, sell off the house and keep the part of the land he needs. Hard money is expensive (mid double digits interest rates and a handful of points), but that's probably your best chance at quick funding. Your numbers are a little confusing, though, so I'm not sure how much more cash he might need to come up with. If the house is worth $160K as-is and doesn't need any work, then ARV isn't $230K. Or, if ARV is $230, then that's about what its worth now.

Any other assets that could be mortgaged or sold?

Any other source of much?  Friends?  Family?