All Forum Posts by: Brett Chandler

Is the property on the market currently? I would just use a real estate attorney for documentation. You could negotiate a lower purchase price since the seller doesn't have to pay realtor fees. You don't get a commission that way, but you get a property below market value. Or pay market value with a seller concession to closing costs, etc. Good luck! 

@Jake Wiley, Thanks for the response. Definitely some good things to think about. It would definitely be simpler to exclude the house from the deal and just buy the shop and land around it, especially with property values as high as they are. Not to mention that the only ROI would be based on hopeful long term appreciation. I appreciate the insight.

Hello BP fam,

Looking for some insight on a possible purchase for personal use and long term investment. I recently found the 'subject to' and creative financing podcast and it got my wheels turning.

A little back story here: we bought two adjacent lots to our home, totaling 8 acres. Lots are raw land, mostly non-buildable, with about an acre that zoning would allow for 8 homesites. One issue is that it would require me to put a road through my back yard to access the homesites, which I do not want to do.

So here's my thought - Our neighbor on the other side owns two acres with a big shop. I would like to own the property for use of the shop, and access to the build sites without putting a road through our back yard. He is an older gentleman who grew up in the home and had to fight to keep the home when his mom passed away, as she had a reverse mortgage on it that I believe is free and clear now. All that to say, he is probably not going to be a motivated seller.

I was thinking offering to purchase his property with seller financing (something like $1,000/mo at 0% interest, with a 10yr balloon?). Then keep him as a renter for $1/mo. That way he would get to stay in the house for as long as he wants, make $1,000/mo, save the monthly tax and insurance cost, and not be responsible for maintenance. And I would get the access to my property, possession of the shop, and the home when he vacates (to rent, BRRRR, or divide and sell).

I would love to have you shoot holes in my plan, share any ideas you have, success stories, failures, etc. Thank you!

Hello BP fam,

Looking for some insight on a possible purchase for personal use and long term investment. I recently found the 'subject to' and creative financing podcast and it got my wheels turning. 

A little back story here: we bought two adjacent lots to our home, totaling 8 acres. Lots are raw land, mostly non-buildable, with about an acre that zoning would allow for 8 homesites. One issue is that it would require me to put a road through my back yard to access the homesites, which I do not want to do.

So here's my thought - Our neighbor on the other side owns two acres with a big shop. I would like to own the property for use of the shop, and access to the build sites without putting a road through our back yard. He is an older gentleman who grew up in the home and had to fight to keep the home when his mom passed away, as she had a reverse mortgage on it that I believe is free and clear now. All that to say, he is probably not going to be a motivated seller.

I was thinking offering to purchase his property with seller financing (something like $1,000/mo at 0% interest, with a 10yr balloon?). Then keep him as a renter for $1/mo. That way he would get to stay in the house for as long as he wants, make $1,000/mo, save the monthly tax and insurance cost, and not be responsible for maintenance. And I would get the access to my property, possession of the shop, and the home when he vacates (to rent, BRRRR, or divide and sell).

I would love to have you shoot holes in my plan, share any ideas you have, success stories, failures, etc. Thank you!

@Brad Hassett, I think that sounds like a solid plan, as long as you can get a decent rate on that c/o refi. Good luck!  

Hey @Brad Hassett, depending on your HELOC servicer you may be able to lock a portion of the balance, but typically the interest rate is variable on the whole balance. In terms of what to do next, it really just depends on your goals. Are you investing for cash flow, appreciation, OPM for principal reduction, etc? If you borrow against your rental, you will pay higher interest and your cash flow will take a hit. If you use the cash to purchase an appreciating asset, though, it may be worthwhile. I hate the idea of refinancing out of a 2.75% rate on an investment property, but I would probably go that way, unless you are able to pay down a HELOC balance quickly. What are the details on your primary residence?

Personally, I just refi'd my primary into a first lien position HELOC and plan to use the available balance to get started on some BRRRR investing - pay cash for fixers from my HELOC, and refi to pay myself back.

@Zachary Himes congrats on getting started! It sounds like you've got some really good things working in your favor and some solid advice on this thread. I would echo that your best options are to wait and save your 3.5-5% down-payment, get a down-payment gift, or find a financial partner. Are you planning to stay in the Seattle area? Eligibility requirements (geographical and financial) would apply, but if you were willing to live in a more rural area, you may also be eligible for 0% down on a USDA purchase. Good luck!

@David O., great question! First of all, congrats on the progress you have already made. There are a lot of moving parts to your question. A couple of things that come to mind are: what is the remaining balance on your primary residence and fourplex? What is the cash-flow on your fourplex, and how much would it increase if you eliminate the mortgage payment? If the increase in cash-flow is more than the increase in payment, it might be worth looking at. Have you thought about using a HELOC or All-in-one on your primary to pay off your fourplex? Your interest rate would be variable, but if you use the increase in cash flow to aggressively pay down the principal balance, you could save significant interest cost and maintain the liquidity of the open-ended line of credit. I just refinanced my own primary into an all-in-one and am looking forward to tapping into that equity for an investment property, myself.

Talk to your lender, but your minimum down-payment would be less if you make it your primary residence and house hack, if that is an option. Not sure if it would meet the criteria, but second homes also have smaller minimum down-payments than investment properties. Good luck!

Hey @Brad Hassett, @Aaron Byrne brought up some good things to think about. Are you talking about borrowing against your current primary residence? I would also say that it depends on how quickly you think you'll be able to move on your next purchase - the HELOC would give you the funds available without charging you interest until you use it. I love the flexibility of HELOC's, but it's not a tool I would carry a balance on long-term. I would personally rather pay a lower, fixed rate than to carry a balance on a variable rate. Your loan costs would be less with a HELOC or Home equity loan than a refi. Depending on your current mortgage, a cash out refi might give you better cash flow, with a lower single payment instead of your current mortgage as well as the HELOC/HEloan. The HELOC/HEloan would also allow you to leverage more of your equity, without introducing PMI into your equation. Hope this helps. Good luck!