All Forum Posts by: Paul Burbank

I am also wondering...not sure how to word this....is it acceptable for me to ask for references regarding the note? As in someone else they are currently making payments to or someone who they had a note in the past with where the balloon came due and they paid it off?

Hi BP. I am currently working on negotiating an off market deal to sell my primary residence 3 unit property in Saratoga Springs, NY. The potential buyer wants to give me a good price for the property but would like me to hold a second position note. The issue of the note is what I could REALLY use some help with as I have ZERO experience in this area.

Here is where things currently stand:

His last offer to me was for $575,750 with a 2nd position note of $35k at 5.5%, 25 year term, 6 year balloon.

I have the following questions and would also appreciate any other input you all have to offer.

-What can I do to protect myself in the event that he defaults?(Aside from talk to my attorney. I of course will do this.)

-What terms should I be pushing for(rate, term, balloon, principal only or P&I payments and anything else I might be missing.

-In his own words the purpose of the note is "they bring less cash to closing and can offer higher prices". My previous offer was $590k and I think this is close to where we would be listing on the MLS. I feel $575 is fair but if I'm going to defer $35k for 6 years I feel like I really want to get something more then a few thousand in interest out of it...especially for the risk...any thoughts on this idea would be great!

I am also having some trouble determining the value of the property as local RE pros have given me HUGELY varying numbers and comps are basically non existent in the area(tons of similar properties but no one is selling) This is probably a topic for a different post but any input in this area is welcome also.

Thank you! I look forward to some conversation on the topic!

@Brian Rosher I would love very much to do just that and am currently exploring my options on that front. My wife and I were actually just talking last night and pretty much came to the conclusion that we are going to buy something utilizing 203K.

As to doing this separate form the electrical business, we certainly will be consulting the proper people but do have any insight by chance as to why we would not want to do this under the existing entity?

Do you regularly work with investors in the capital region Brian?

@Rob Stanback Thank you very much for the info!

 Can an entity typically obtain a conventional 30 year mortgage on 1-4 units?

Would that 10% down be 10% of the purchase price I assume? Or 10% of the total loan amount 

What type of documents would from the entity would you be looking to see? And what Loan to ARV would you be willing to typically go to?

Hello BP. I have spent a lot of time searching the forums for info on this topic and not come up with much specific information. Any help, info, advice, or stories of your own experience are GREATLY appreciated!!!

My father and I run my families electrical contracting business in upstate New York. I also have owner occupied a 3 unit property with my wife and kids for about 3.5 years now. I have finally talked my father into investing in real estate through the corporation. We want to do fix and flips as well as buy and holds on multi families and, possibly, commercial real estate.

I am no pro investor but I have spent a lot of time over the last 5 plus years educating myself as well purchasing and managing my own property. I am very familiar with the basics of investing. I know how to find and analyze a deal, how to negotiate a deal, I am familiar with most of the different types of financing I can attempt to acquire as an individual.

My biggest question at this point, I suppose, is what types of financing can I acquire as a corporation and what types of properties and deals can I leverage against. What kind of terms might I be looking at, what will a lender require of the business(experience, available cash flow, personal guarantee, documentation, etc.), will any cash flow just funnel through the business' normal revenue path? 

Can I go to an HML for fix and flip funds? Can I use a personal HELOC to purchase property through the corporation?

I realize I am being a bit vague here but I am not entirely sure even where to start on this so any help or insight on these topics or anything else would be greatly appreciated. I have reached out to a couple local banks but the information I have been provided with has been extremely vague. Maybe I just need to make more calls.

I look forward to any responses!

Would anyone be willing to follow up on @James W. questions? I am very interested to have these answers as well. Perhaps @Ed Emmons could provide some additional info?

Can you perhaps point to somewhere that this is explained? Such as somewhere on the FHA website? It would go along way towards making my case and I can't seem to find anything on it myself. I have several people telling me that this is in fact a rule in the way it is being interpreted. My loan officer, the underwriter, a local mortgage broker who my agent knows very well, etc; My loan officer even went above the underwriter to his bosses and they said this was in fact a rule and this property does not meet the requirements for satisfying it.

Also, just to be clear, I am having no problems getting income qualified with this property. My dti and all that is good(they used 75% of rents as income not 85%). We have the nessceary funds to close, down payment, reserves etc;. We have cleared every hurdle except this one even getting a commitment letter from the lender and everything. Today is the last day to either get an extension from the seller or walk away empty handed. 

The last minute issue is that they are saying this property does not qualify for FHA financing currently because 85% of the gross rents for the property(including the owner occupied unit) are not equal to or greater than PITI. If you can tell me where it says this is in fact not a rule or not being interpreted correctly maybe this can be saved yet but short of that I am at a loss. I cannot argue with the lender who holds all the cards any more then I already have without some sort of substantial evidence stating they are wrong. And even then I may be sol.

 This will definitely not be an option. Thank you for the info. Can anyone else provide me with some advice?

Can anybody offer some advice? I'm desperate here.

We are currently in the process of closing on our first property using FHA financing. Most everything has gone smoothly until now. I am just finding out that with 3-4 unit properties 85% of the gross monthly income must be greater than PITI to meet FHA requirements.

This is a triplex in which each unit should rent easily for a minimum of $1400 per month (probably closer to $1600). The appraisal states that fair market value is only $1150, which is actually less then they rent for now.

My real estate agent has already provided the bank with several pieces of evidence illustrating that this appraisal is wrong. Everything from copies of leases from other local properties, to price listings at area apartment complexes, to listings for other units in 2-4 unit buildings within blocks of the property in question. We are waiting to here back whether or not they will approve the loan based on this information.

I am trying to see if there is anything else I might be able to do to move this forward. Can I ask the bank to allow us to get a new appraisal? Might I be able to switch from FHA to a conventional with 5% down? Is there any chance that the bank will accept this application if the appraisal doesn't explicitly state that the 85% rule is met? Any help would be GREATLY appreciated. This deal is hanging on by a thread.