All Forum Posts by: Michael Vest

@Dave Foster

Read this thread a month ago as we were purchasing a 1031 replacement property. We closed last week. Did it as a cash purchase since appraisals were 45-60 days out and holding up the loan to meet closing date. $775k purchase with $320k exchange proceeds.

I contacted a loan broker we've used several times in the past. He spoke with their underwriter and said they can do delayed financing, up to 75% LTV, but all exchange proceeds need to remain in the property. Based on his email, we could only finance $455k (59% LTV). We were planning to finance up to the conforming limit ($548,250 or about 71% LTV).

Is this just something with this particular lender requiring exchange proceeds to remain in the property, and another lender could have different rules? If we are stuck with a $455k loan, guess we need to evaluate just waiting 6 months and do a normal cash-out refi.

Thanks,

Mike

@Stephanie Medellin, thanks. I would not have the HELOC funding tied to a secured note for that reason. In the past they have loaned us the money, they tell us how much interest and we give them a check. No note or anything. Was just thinking something more formal (unsecured note) would help paper trail the source of funds if we do delayed financing.

We qualified for loans on this and the AZ house without any consideration of rental income (STR or LTR) on the property being purchased, so I'm not concerned about lack of 2 years of rental income for this purchase and/or refi.

We looked at expediting/rushing appraisal, but with AZ no appraiser would take the file, and it sounds like only one is willing on the OR property (wanted to charge $2500 and still be 6 weeks out), Based on phone conversations Friday if it's "on hold" even that may not be an options.

I'm running into a snag on a purchase we are working on.

Background: We are doing a 1031 exchange. Two LTR townhomes into a larger active STR. COE 7/9 and 7/15 on sales. $320k net combined proceeds; $250k mortgage payoffs (combined).

We had one deal in AZ fall through already because lender wanted > 60 days for appraisal and seller wouldn't extend. AZ file was complete in underwriting except for appraisal.

Currently in escrow on another property in OR. Offer on 6/19, with COE 7/30. Same lender said no issues getting appraisal in 45 days. Now we are 2 weeks in, and have had 3 different stories regarding appraisal (was scheduled for 6/30, then this week said they wanted 29 days from order - putting it past 7/30 close, then yesterday said appraisal was "on hold"). This was similar to what we saw on the AZ deal, so we've been looking at other options.

This OR seller seems more reasonable. Originally wanted COE on the end of a month (7/30 or 8/31) to simplify STR bookings & management company. After reaching deal on final price after inspections this week, he's willing to have COE anywhere in the month and we would sort out STR bookings based on COE date.

Purchase price is $775k with $420k down, $355k loan. Need that down to support 1031 exchange rules at time of purchase. Our plan would be to refi ASAP probably up to the conforming limit ($548k), which would be doable if it appraises at least $731k @ 75% LTV.

We are considering the following:

1. Continue working with current lender, knowing they screwed us over once and looks like they are about to repeat
2. Spoke with a loan broker in OR we have used before, he was less committal about closing 7/30 but thought 8/6 may be doable but is checking to verify he can meet dates before he says he can. Based on our history with him I trust him, but still likely miss our COE date. Again, appraisal timing would be the long pole in the transaction
3. Looked at hard money but numbers just don't work since we have other options.
4. We looked at options for paying cash for purchase so we aren't tied to loan appraisal. In-laws are willing to let us use their untapped HECL, and combined with 1031 proceeds and cash we have we could pay cash, saving some closing costs. We've used their HECL when we bought our primary ~10 years ago, so we have a history doing that (we just pay their monthly interest payment for them).
5. Was reading/learning about delayed financing last night and could be an option if we plan the cash route too. Guess we could get cash out sooner than 6 months, push the appraisal timing to the delayed financing so that it doesn't hold up purchase. Guess there could be questions regarding using the in-laws HECL (that wouldn't arise in a normal 6 mo refi), but if we draw up a unsecured loan agreement should be OK?

Right now we are really favoring the cash based route just to get the deal done sooner rather than later (maybe 7/16). Delayed financing may meet our near cash out desire if it doesn't hold up closing and there are no issues with the in-law HECL source of funds.

Any community thoughts/opinions? With holiday weekend probably won't have to move forward with a plan until Tuesday.

Thanks,

Mike