Can I finance this way?

Question

I have off market option for SFR in Medford Oregon for 95k. It is worth at least 210k and needs no work done. I asked a bank what they could do for me. They needed 15% down and closing costs.

Is it a common overlay to require a down payment when the purchasing way under retail?

My half-brain plan:

I work with the seller to add my name to the title (assume they will), have them sign over the rights to refinance (or something similar) then apply for a refinance loan to pay off the other parties HELOC.

I am simply trying to avoid a down payment for a 15 year loan for a rental. Would this work \ worth the hassle of avoiding the 15% down?

Any thoughts? Thanks for reading.

Michael S. Helton · Answer

Account Closed said, just go elsewhere.

Jeff V. · Answer

Account ClosedIt may not help with the immediate 15% Down issue, but have you thought about using the 15% down option to purchase the place then put on a HELOC using the equity on that same property and then cut yourself( Or your LLC) a check for the 15% you just had to put down...Just a different way to skin the same cat... however it would require the 15% up front even if only for a few days... but would be 100% financed. This method could also be used to fund a rehab on that same property... if so required...Or you could use HELOC from another property's equity for the 15%... not sure if your in that position...Just an idea.

Adrien C. · Answer

I had a similar situation a few months ago where I was looking at a $300K house for $190K which needed about $10K to get it rent ready. Every bank wanted 15-25%?down regardless of equity. A friend in the industry who also invests in RE suggested owner financing (house was paid off) with a recorded mortgage. After 12 months, could do a regular refi.

David Fritch · Answer

What does the seller want? If they want to cash out ASAP and you can't find a bank to work with you, find a money partner to do a joint venture (especially if they have experience/skills you need) or a private lender to do hard money. Most lenders will want a down-payment but some will not if the deal is right and they're ok with asset based lending. Once the house is in your name refinance it and pay off your partner/lender.Now if the seller is not in a hurry, you have a range of options. Lease with an option is a pretty basic one. That buys you some time. Either way unless you don't find a bank to work with no money down you have to break into two steps one way or another. Step one gets you control and step two is your buy and hold low interest loan. Sure you'll have to pay for a few financing fees two times but that's just the the cost of doing business with the kind of equity your getting. PM me if you need contacts for a couple assett based lenders. Also, Brandon Turner's book on investing with low and no money down is fantastic. You can get a digital copy and do a quick study for ideas.

Demetri T. · Answer

Joe,I'm here in Oregon as well. I would just keep shopping it to another bank. If your value is correct just tell them how much $$ you need to purchase and tell them they can have the first mortgage.Most banks just want the LTV (loan to value) to be 70%. Sounds like you got a banker who didnt know what to do. If it is your first property maybe the banker is just being cautious with you...?If you keep having trouble feel free to PM me and I'll put you in touch of some of the banks I use down here.Demetri

Account Closed · Answer

I have and will continue to agree with you on your approach to secure deals. In this unicorn situation I have time to finance it any way I chose. Without the cash, what beter way is there that doesn't involve financing twice? So far, in this unique scenario, no better option has been mentioned.

Account Closed · Answer

If the owner had a loan or HELOC, would a due on sale clause or something similar if someone is added to the title?

Account Closed · Answer

Bump to @Kimberly Jones and @Chris Field

Account Closed · Answer

I wasn't intending a discussion on chapters of the low or no money down book. There are numerous posts on that and didn't want to make a new one. My intention was to see if anyone has ever done/thought of adding themselves to title to finance the deal once and with more favorable terms. @Kimberly Jones I agree that the methods you suggest are valid ways to finance a rental property. But if your name was on the title, would you still need to go through all trouble of financing it twice or create an LLC? Would a bank require you to put a down payment for financing a property you already own?@Chris Field,Having a lender relationship has it's benefits. No doubt about it. I am simply formulating a much simpler and cheaper method to finance an non owner occupied property. The barrier is getting on the title. In most wholesale or off-market purchases, this would not work due to delay of underwriting. But if you had the time, would this work?A situation I can think of that would work is if you were purchasing from a friend or relative.

Account Closed · Answer

@Neal Collins,This will not work for most purchasing agreements for the reasons you mentioned. I was simply exploring this as an idea on how to finance with better terms. I am being offered to pay off someone's line of credit for the deed with the option to buy it back. Not a common situation.Thank you for sharing your concern.