All Forum Posts by: Andy Madden

I’d highly recommend Capstone Engineering. I’ve used them a few times including most recently for city-required drawings for a re-build of a two-story addition on one of my rentals. Let them know I sent you their way!

Paul, I see this is your first post - welcome! I just sent you a private message with an idea that might be a good solution for you. 

@Scott Dupree I've purchased a number of smaller multi-family properties using commercial loans and my experience has been that banks take into account the whole "credit file". They don't necessarily look at property metrics first and personal creditworthiness second. All of it factors into their lending decision. It makes sense if you think about it, because you'll be signing a personal guarantee when you buy the property. Therefore your personal income and creditworthiness are just as important as the property itself.

What banks in the area have you approached for a loan? I might be able to give you some ideas if you PM me. Before leaving my job I was in a similar income/credit score situation and, based on your numbers and the current lending environment, I can't imagine many banks that would turn something like this down.

@Joe Villeneuve - the contract is in place with the seller. My original post was meant to generate discussion/ideas around rent credits and a lease option vs. land contract with the end buyer, but I think it evolved a little bit! In any case, I will keep this group updated.

@Steve Vaughan, @Joe Villeneuve - thanks for the input on how to handle rent credits (or lack thereof). That's the one piece that I've been hung up on. That said, I really like the approach of either a) reducing the price or b) offering seller assist at the closing table.

Steven, your point about transfer taxes is a good one, especially because where I live has one of the highest transfer tax rates in the country, to my knowledge (5%). That said, the current owner is adamant about selling it with financing as opposed to doing a lease option; he wants the certainty that he'll be completely free of the property when he retires (at the end of the 2.5 year term). So unfortunately there'll be a double transfer tax hit, but the margin on this particular deal makes up for it. 

Thanks @Steve Vaughan! What are your thoughts around rent credits with a lease option arrangement? How much if any should the tenant buyer receive in a credit toward the purchase price for each payment made?  In the case of a land contract, I assume the credit would be the principle portion of the note agreement we sign, but I’m less clear on what would be reasonable in a lease option scenario.

Hi Joe,

The tenant-buyer will be living there both during and after the 2.5 year term. To use specific dates, if I closed and took title on April 1, my 2.5 year term with the current owner would begin. I would pay him $500/mo during that time. I would also start a lease option or land contract with my end buyer on the same date (or one day later). They would pay me $950/mo. For 2 years and then refinance and get a traditional mortgage, at which point they would pay me the remaining balance of our agreement, take title to the property, and I would pay off the original note from the seller I am purchasing from.

@Alex Deacon thanks for your thoughts on the additional insurance considerations; I agree completely.

@Joe Villeneuve this is an interesting approach I hadn't considered. If it helps, the contract in place to buy is a traditional purchase and sale agreement. The only "unusual" thing about this part of the transaction as compared to a traditional home sale is that the owner I'm purchasing the home from will hold the mortgage for 2.5 years. During this time I'll have title to the property and get the all benefits of ownership, including the fast debt paydown on a 0% interest loan.

Hi everyone,

I have what might be a basic question for the creative finance folks out there, but I appreciate the help in advance.

I have a contract in place to purchase a home from an owner who has offered to finance the property at 0% interest for 2.5 years. He's going to accept $500 monthly payments for 2.5 years until he retires, then I'm going to pay him the balance at the end of the term. This will be a straight owner finance situation where I will take title and he will hold a note, which will have a balloon payment at the end of the term. On the other end of the transaction, I have a buyer who is willing to put down a sizable down payment and make a monthly payment of $950 for 2 years, then pay off the balance at the end of the term. 

My question is this: what is this best way to structure the transaction with the end buyer? Would it be a rent to own agreement, lease option, or land contract? I'm curious to hear the pros and cons of each. The second part of my question is how to handle the payments from the end buyer (i.e. does a portion of the payment get credited toward the purchase price)? Or how would payments work with a land contract, which I understand to be more like owner financing, except I will retain title to the property until the end of the term?

Thanks for your insight!

@Kenneth Dill, I will send you a direct message.