How do I structure my first deal?

Question

I don't want to put any money down, but I'm not sure how to structure it. For the cash, I need your reference for a hard money lender. Here are the underlying facts:

1. It is a blanket loan, which means that all three properties have one single closing cost.
2. They owe 110,000 and their asking price is 117,000. However, they are in the final stages of foreclosure, are divorcing, and need a quick sale.
3. Their current payments are 1,223.77 PITI.
4. One is rented for $575. The tenant has been there for years. The other two have market rents of $525 and $550.
5. The comp value (based on nearby sales) is $160-$170 for all three.
6. No major repairs are needed.

My goal is to assume their loan, or offer them seller financing, and then re-fi immediately after closing. Because it is november, it would be hard to sell so I plan on holding them as rentals/lease option. They have found a tenant for 1 property at $525 and I plan to lease option the second. How do I structure this deal?

Thanks!

Ljay Jones · Answer

1. every house needs something have you factored in you fix up cost at min you need paint and carpet. 2. your paying too much for it 3. you are contradicting yourself how can you have the seller carry back the mortgage if they want out? 4.What are you basing comps on , I mean who gave you this information, comp are what has sold not what is being listed FYI The one thing I would say is you already know how to structure the deal, you just did a bad job of doing your numbers. I think if you keep doing numbers on properties you will be buying soon. The most important thing to do NEXT property evaluation is to remember is to buy at 60-70 percent ARV depending on how much you want to make and your market. I think you will be fine and are doing 100 percent better than most newbies however don't ask for a hard money lender, there is a forum with suggestion and at last resort google it, if you want somthing take your own will and find it yourself, I believe the only question in RE for newbies should only be is this a good deal or not. (after they have read and studied the proper amount.)

N/A N/A · Answer

Some really good posts here. Let's add some more. You mention the chance to assume their mortgage. If you are able to do this then you assume the loan they have which means limited to no closing costs! Great! Or Make an offer if the seller is trying to get something out of it or if you want to try and get a lower price. But, their back is up against the wall if they are near foreclosure. You may have realtor fees, closing costs, and so on. However, if you make a low offer the mortgage company may do a short sale. This would save you some money on the price. There are a lot of good questions in the above posts. If this was me I think I would try to assume the loan. The mortgage company may do a deed in leiu to you. You will run into problems refinancing this project most likely. It is rare to use conventional lending or residential lending on a blanket investment refinance. I wish I could provide more details about this but it is normally a commercial lender that does these.

Tom McGiveron · Answer

sally, how SOLID are your comps? meaning - do the comps match? have you done this before? [just curious] chances are you can't assume their loan or at the very least, this will be a challenge at first - you have to speak to the lender...and not just the low level loan specialist - you need to speak to someone who can make a logical decision. obviously, if you have good credit, the lender at the end of the day would be better off letting someone assume the loan rather than foreclose on the property. and r2 has a point - the sellers are not going to carry anything. why would they? they are in no position to do so. they want out and they want to sell this sucker NOW. get all new financing, like r2 said - get it under contract - but make sure IT'S THE GOOD DEAL YOU SAY IT IS FIRST. also - the thing is only 33% rented right now? how long have the other units been vacant? what do you bring to the table that makes you think you can do it better? why couldn't the current owners make it make money? what did they do wrong and how will YOU fix their screw ups?

Matt H · Answer

If you're getting that good of a deal don't try seller financing as your first option. Try to come up with an option that gets them out of their predicament, such as buying it with no conditions. Because if they want a quick sale they're not going to want to carry anything. I'd use that as a last resort if you can't find other financing first. Also the first step is just to get a sale price hammered out and signed and dated. That way you have the property pending so no one else can take it from you. Then go from there.