All Forum Posts by: Archie Minkowski

All-

Would appreciate help gaming out this deal...

My partner "Chuck" and I recently purchased an estate home in a rapidly improving area for $350K cash provided by a long-time investor friend.  It is turnkey and ready to sell or rent.  The current market value of the home is $400K and if interest rates drop we expect the value to rise to the $450K level. 

Owner financing is one of our business models and a very qualified buyer offered us 4% cash down and 7% interest for 30 year note.  The buyer has been vetted and can handle the payments.  

I understand we could sell the note at a discount down the road but would prefer to have the buyer eventually refinance out.  

-  Should be counter-offer and require a balloon payment after 12 - 24 months?  

- Say we want to hold the note for several years but get our financier Chuck out of the deal. Is there a way for us as the bank to refinance the note and pay him off, then continue collecting mortgage payments? Can DSCR loans be used for owner financing or rentals only?

Thanks for the continued wisdom.  

-Arch

Thanks @Ke Nan Wang.  All points understood, and we have an excellent attorney who can pull all this together.

One follow to point #2, the amortization.  Do we (sellers) determine how much of the monthly payment goes to principal, or do we negotiate that with the buyer?  

We have a home in a desirable area and a couple of folks have asked if we'd consider owner financing, so we're considering it.  We would obviously ask for a down payment, proof of income, and proof of insurance.   We'd offer the home at market rate interest or just slightly higher.  

1). How are taxes handled?  

2). Monthly payments. How do we amortize the deal?  Does all of the money go to the principal, or is it counted as "interest only" for a time?

3). Is there a way for us to sell the note down the road and exit the deal?  

Greatly appreciate any wisdom. 

 Thanks Luther.  All of our deals are straight cash with no banks or mortgage companies involved, so it's a little cleaner.  Benefits of having a partner who sold a software company.  

 Thanks Sean.  I understand the wholesale part.

Regarding the offer contract. The signature line at the bottom would be the LLC name, and one of us would sign on behalf of the LLC?

I recently formalized a company with an investor friend. We formed a two-person LLC and have equal authority.

We are purchasing flip and rental properties under the name of the LLC. I know this is a very basic question, but how do we sign a contract to purchase a property? Is the contract in the name of the LLC and then I (or my partner) sign one of our names? The whole reason we formed the LLC was to avoid buying property personally as we've done in the past. We recently found a property to buy and the seller insists we both sign the offer contract, which may be a deal-breaker.

Thanks for any wisdom.

I flip houses with a high net worth investor; he's the money guy and I manage the projects.  We had a new deal pop up recently and I'd appreciate your brain power.  

We were approached by a homeowner who has a small SFH on a one acre lot in a very desirable area of town. He has approved plans to knock down the old house and build two luxury homes on the lot. To be clear he has drawings, city approvals, etc. He also has a construction loan approved for 80% or $800,000. He will live in one house and sell the other and likely clear $400K or so. He needs $200K gap funding to close the deal and has proposed my guy put up the funds in exchange for a 20% ROI.

This means the bank will have a first lien on $800K on the deal and my guy will have a second lien on the $200K.  In my opinion this is a terrible deal for my guy because the second is worthless if the deal goes south and the bank sells the houses to recoup their money.  

Is there a way to secure my guy's gap funding, other than a lien?  

Thanks for the response.

Hello Everyone.  I'm a long-time lurker and podcast fan.  Retired LEO now living in TN.

I've flipped a few houses through the years and have a couple of new opportunities on the burner.  I've used hard money companies in the past and now have a business colleague offering to loan funds on the fix-and-flips, both purchase and rehab funds in one lump sum.  To be clear this would be private money from an individual and not a company.  

He's asking 12% APR with no points or fees. The interest to be paid after the house is fixed and sells. This may be a simple question, but does that essentially mean 1% for each month his money is tied up? (12% divided by 12 months.) For example if it takes us 5 months to flip and sell, then we'd pay 5% at closing.

Thanks everyone for the great info on this site.  

V/R - Arch