All Forum Posts by: Richard York

Hi all,

I've got a bit of an issue and would like to see if anyone has any advice for me. I made the mistake of investing with a family member and this person now wants to pull out of the deal after 3 years. We had agreed that this was an option all along so we have to find a way to make it work now. Basically, we purchased a SFH 3 years ago and this person contributed cash for a 20% share of the property. Everything has been done informally and the home is in my name and she's done nothing other than send the cash. So basically, she put $21k cash in, I put the rest to get to the min down and then I mortgaged the rest. These are my calculations (rough estimate) on how to buy her out:

Partners's initial investment: $21,400 cash

20% of appreciation based on $175,000 estimated value of home today: $175,000-$107,000 (purchase + expenses) = $68,000*20% = investor's share $13,500

So partner's current equity in the property is $34900

In order to take cash out of the property/refinance, there are expenses:

$2400 legal, appraisal and other bank fees

$ 4000 penalty to take cash out and refinance

25% capitals gains will also be charged to us when we eventually sell the property. If we were to sell today we would pay 25% of the $68,000 appreciation above. This is an additional tax of approx. $3400 on her share of appreciation.

Total expenses to pull cash out of the house is: $9800

Total appreciation minus expenses is $3800 

Total that we would pay to investor is: $21400+ $3800

HOWEVER, the mortgage penalty is not strictly her fault as she didn't have any part of the mortgage.  I'm not sure if any of these expenses should be allocated to her.  Basically, if she had not chosen to take her cash out, we wouldn't be having to pay this.

Anyone know how a more formal agreement would have been structured?

Thanks in advance!

Just spoke with my lender. They do not let foreign nationals cash-out or refinance. They also don't offer a LOC. I guess my other option would be to find another lender to get a second mortgage? Or maybe switch lenders to one that allows me to take more equity out. Is this done?

Hi all,

About a year and a half ago, I purchased a SFH in Phoenix, did some rehab and have been renting it out since then. The property values in the area have risen dramatically over this time and of course, I purchased under market value at the time. With the down payment, rehab and appreciation, I expect that I have about $50k in equity in the property.

I'm now looking a purchasing a second property and would like to tap into the equity. What would be my best option to get the cash out? Also, am I best to deal with my current lender or not? As I'm a Canadian citizen, obtaining US financing the first time was a serious challenge so I'd like to avoid too much red tape.

Thanks!

Hello,

I've recently purchased my first SFH investment property and am doing some rehabs before putting it on the market. I'm looking at options for property managers and was wondering if it's normal for PMs to put a lock box on properties and let prospective tenants visit on their own. Where I'm from this would never be done but perhaps in different parts of the country this might be normal practice? Any thoughts??

Hello,

I'm a Canadian investor and with a short sale about to be approved. This is my first investment property and I've got a US lender that has pre-approved me for a mortgage with 30% down, 5yr fixed, 30 yr amot at 5.25%.

I also have a Canadian line of credit that I could use at 3.5%.

My question is which one to use? There are certain pros to going with the mortgage but the costs are obviously higher. The other thing that I'm not 100% sure of is if I can write Canadian interest expenses off of US income when filing US taxes.

Anyone else ever write off foreign financing expenses from US income?

Any advice would be very much appreciated!

Thanks everyone for the feedback. I understand that these options come at a price. The deal would have to be incredible to allow me the room to actually have some equity left myself and monthly cash flow.

The first "service" that I described is actually calculated like this:

Price is $25,000 + 30% mark-up = $32,500 x 30% down payment = $9,750 down payment. Owner financed amount = $22,750 @ 10%.

The original purchase price would have to be way below market value to make it work for me. There are others offering similar servicces though that are more reasonable.

I do also think the best option is to find actual seller financing. There, there's much more room for profit on my end as well. The challenge that I've found is that the owners offering seller financing are usually trying to off-load a property that is difficult to sell for one reason or another.

Our dollar at $1.25? Where did you read that? Most forecasts show is in the $1.03-$1.05 range over the next year. If it's buy and hold, currency flutuation don't matter that much...who knows our dollar might be back at $.61 in 10 years and then I'll be glad I bought when I did...

Thanks everyone for the warm welcome! :)

As a new investor I've been looking at some sites that offer to buy a property for you and sell it back with seller financing. One of the sites marks it up 20-30% and then charges 10% interest on the property for 5 yr term with balloon payment at end of term. At the end, the mark-up plus interest kill any deals that I have. In general, for someone with limited ressources, would any experienced investors see this is an option?

Also have been looking at some of the properties that are turn key and seller financed. Not much room left in them for profit but they can be had for small % down.

What are your thoughts? If you only had a small down payment, would you consider these options?

I didn't say there was anything wrong with it, just that it's tough to come up with a downpayment of 20% when even a crappy property is $200k. Also, with what many people think is a bubble and housing prices set to drop, it's not the time to invest there IMO.