All Forum Posts by: Michael L.

@Michael L. What I meant is that it could be more convenient for you to do the rehab while the property is being financed owner finance and the do the refi after the rehab is complete, that way you could do a cash-out refinance and get some of that money back.

Of course the challenge of doing this is to get the money to do the rehab, for that an option could be do use hard money or do a Joint Venture with someone willing to invest the capital for the rehab and get paid back after the cash out refinance.

Of course the numbers would need to square up to make sure the cash out refi gives you enough cash to pay back the HM lender your partner.

Just an idea that crossed my mind while reading about the situation, you'd have to run the numbers to see if it makes sense for your particular situation.

I haven't done this myself but  a couple things do come to mind.

1.- Seller finance properties are usually sold at a premium so you need to consider this, the bank appraisal needs to match or exceed the amount owed on the seller finance principal.
2.- I'm wondering if doing the rehab work first while on seller finance, with HM or JV, would be better as then on your refi you could get some cash out to cover closing costs

Quote from @Michael L.:

Quote from @Michael Paling:

Quote from @Michael L.:

Quote from @Michael Paling:

I think Eliott brings up a good point. If your plans are to purchase a property through seller financing and just turn around and refinance it, why not just start out with the bank loan? You could probably find a loan from some lender that will include or have ideas on how to fund the purchase costs and the rehab costs. Talk with some local lenders AND investors, because you'll probably be given some good ideas for this. 

 @Michael Paling, as I explained to @Eliot Elias, doin the owner finance allows me to adjust my dp meaning less upfront cost. But I will calculate the differences in the cost of transactions for both strategies.

if your goal is to purchase the property with as little money out of your own pocket, you could also try to find a lender that allows the seller to carry the down payment through seller financing. So the bank could finance 80% (for example) and the seller finances somewhere between 0 and 20% and you cover the rest. That way you don't have the extra closing costs for multiple bank loans.  

 @Michael Paling, I've never heard of that method and when speaking to lenders I haven't had none mention it. But in that scenario, you're basically on the hook with the bank and the lender, correct? An is that all done in one closing?

I haven’t actually done this myself, so I don’t know all the technical workings of it. I’ve had some other investors chat with me about this though. You could ask lenders “can the seller finance the down payment?” Or “can the seller carry a second mortgage?”. A second mortgage would be the seller financing part of the costs (the down payment) through a note held in second place to the bank. If you were to default and were foreclosed on, the bank would have the right to everything first and whatever is left after the bank is made whole would belong to the seller. At least that’s my understanding. There’s several questions I now have after typing all this out. Lol

Quote from @Michael L.:

Quote from @Corinne Ulloa:

Quote from @Michael L.:

Great rising Corrine Ulloa, I think what @Dan Heuschele mean is that if your mortgage is $1,000, after adding the expenses would you be cash flowing? I get having the appreciating area but having room for any type of downturn that will have an affect on your asset is important. What if rents in the area go in reverse and you're hardly cash flowing. An if cash flow isn't the near term goal (which I'd overstand, make sure you have a reserve on standby. Have a wonderful day and I wish you well in your endeavors🫡.

Hello @Michael L. ! Thanks for weighing in. Cash flow was definitely the name of the game for this one, so, it wouldn't be a good fit. 

According to your profile, you are in Baltimore. Do you invest in that market? 

Thanks,

Corinne

@Corinne Ulloa, I'm currently looking for my first fix&flip project and/or my first buy&hold. 

 @Michael L. Good luck! I don't know anything about the market but if for some reason a lead from that area is brought to my attention and it isn't a fit for me, I'll pass it along.

Quote from @Michael L.:

Quote from @Michael Paling:

I think Eliott brings up a good point. If your plans are to purchase a property through seller financing and just turn around and refinance it, why not just start out with the bank loan? You could probably find a loan from some lender that will include or have ideas on how to fund the purchase costs and the rehab costs. Talk with some local lenders AND investors, because you'll probably be given some good ideas for this. 

 @Michael Paling, as I explained to @Eliot Elias, doin the owner finance allows me to adjust my dp meaning less upfront cost. But I will calculate the differences in the cost of transactions for both strategies.

if your goal is to purchase the property with as little money out of your own pocket, you could also try to find a lender that allows the seller to carry the down payment through seller financing. So the bank could finance 80% (for example) and the seller finances somewhere between 0 and 20% and you cover the rest. That way you don't have the extra closing costs for multiple bank loans.  

I think Eliott brings up a good point. If your plans are to purchase a property through seller financing and just turn around and refinance it, why not just start out with the bank loan? You could probably find a loan from some lender that will include or have ideas on how to fund the purchase costs and the rehab costs. Talk with some local lenders AND investors, because you'll probably be given some good ideas for this. 

Why don’t you take hard money upfront for the rehab? The more loans you take out, the more closing costs will eat into your profits.

Quote from @Michael L.:

Great rising Corrine Ulloa, I think what @Dan Heuschele mean is that if your mortgage is $1,000, after adding the expenses would you be cash flowing? I get having the appreciating area but having room for any type of downturn that will have an affect on your asset is important. What if rents in the area go in reverse and you're hardly cash flowing. An if cash flow isn't the near term goal (which I'd overstand, make sure you have a reserve on standby. Have a wonderful day and I wish you well in your endeavors🫡.

Hello @Michael L. ! Thanks for weighing in. Cash flow was definitely the name of the game for this one, so, it wouldn't be a good fit. 

According to your profile, you are in Baltimore. Do you invest in that market? 

Thanks,

Corinne