All Forum Posts by: Kelly Payne

Thanks @Bill Gulley

@Dion DePaoli So if the interest rate is lower than the AFR, then it is not eligible for refinance? Or does it only affect taxes? Thanks for commenting!

Thanks @Matt DevincenzoWould check images be enough to verify payment history, or do they need a third-party involved?

@Eric Black Thanks for thoughts. I have a general idea of the guidelines for refinancing investment properties, but I was specifically asking about seller-financed interest-only loans. So it seems as long as I meet the LTV requirement, the bank will refinance the kind of loan I'm structuring.

My plan isn't to actually hold this one. The plan is to use this IO loan as short-term financing until I sell it (in 3 years or less). But I wanted to be sure that if the plan changes I (most likely) could refinance if I needed to.

@Jon Holdman Right. 2.14%. Oops. I was thinking percentages but wrote decimals. Like I mentioned above, I do understand the general requirements for refis. I have 3 other seller-financed properties. I'm going to take title to this property, and as far as I know do qualify (with my credit score, debt, income, reserves, etc.).

I had this vague memory of a story of a bank refusing to refinance a seller-financed note because of the payment structure. That may not be an accurate memory, but I wanted to be sure I asked everyone here before I finalize the loan terms.

Hope that makes sense and sorry for the confusion.

Hi all,

I'm trying to hash out the details of a deal I have. The house is worth $95k, the purchase price is $56k. The seller has agreed to an interest-only loan of $100/month with a 5 year balloon.

My first question: Will this type of loan qualify for a refi with a traditional lender when the time comes?

My second question: Does this arrangement put me at risk of appearing "predatory"? The seller is very happy, and I backed into the payment based on gross rent - expenses, but that interest rate works out to be incredibly low (.02%). Are there any risks to myself in moving forward?

Fair enough Bill. :)

George - Thanks for your thoughts. It's been a good experience already, so that's a great point about the learning opportunity.

It is a flat roof, and I know enough to have heard that they're a pain. Do you know if it's possible to change it to a different system, or whether it makes financial sense to do so?

Mike - Yes! It's the terms that are so attractive. I would cash flow right away, but entering a whole new territory and lots of risk by taking it on myself.

I'm not sure I could refi after the 5 year balloon. My bank's commercial lender talked with me about this property, and said that mixed-use commercial is the most difficult kind of commercial to finance, since they underwrite retail/industrial/laundry/residential differently. He did say, though, that as long as the numbers were strong, it was always possible. Not exactly promising, but something, especially with the cash flow I would have.

Right now there are two vacant shops in the building, so there's more potential for income than the current 30k net, but I'm basing my numbers on the current figures.

I ended up trying to structure a non-recourse offer to her by having my bank take a 1st for the 50k down payment and the owners carry the rest as a second, but they didn't go for that (I wouldn't either, I suppose). I couldn't think of another way to structure it with as little liability as possible, so for now they're going to start looking for a commercial realtor, but if I come up with another solution, they're all ears.

Any other creative ideas?

Thanks, Bill! Lots to think about and research.

*"I think she's willing to budget more" should say that I think she's willing to budge a little more/take less.

This is a property that more or less fell in my lap. I'm a wholesaler so I only know residential, but I have a probate lead that is a commercial building. It's mixed-use, with a retail, laundromat, two industrial shops, an apartment and a house (right behind) that are all on the same parcel. The portfolio also includes two rental houses next door.

It looks like the ARV of the the properties is around $300k (mostly based on assessor's valuations). It's in a low-income area, with long-term tenants. It currently nets $30k a year, with potentials toward $45k. The building needs a new roof in one section, and is generally run down but in decent shape, like most of the area.

The family is very motivated, and offered to do owner financing. I gave them a few options and here's what they countered with:

Commercial building and the residential properties
Purchase Price - $250,000
Down Payment: $50,000 - Cash
Balance of $200,000 - we will finance this at 4% amortized over a 30 year term with monthly payments of $955, Balloon payment in 5 years for the full balance owed.

I think she's willing to budget more, but does this deal have potential?

If it does, should I try to keep it myself, or should I partner or even wholesale it? As I said, I'm in unfamiliar territory, so any thoughts would be appreciated.