All Forum Posts by: Lyle M Smith

Quote from @Jaron Walling:

@Lyle M Smith Big win man! - Did you have to pay out the seller's equity position or something to get the deal done? 

That cash-flow will be spectacular in a few years as rents creep up.  

Thank you! Yes that’s the only downside besides the painfully slow mortgage process. The good news is since it was an FHA loan the seller only put a small down payment back in 2021. The bad news was appreciation was pretty massive since 2021 so I had to clear out my life savings to buy out his 130k of equity. Basically like putting a 30% down payment for a shorter loan and lower interest rate. My amortization schedule is nice cause it shows I’m already paying mostly principal. While a new 30 year loan is mostly interest in the beginning years.

Quote from @Tyler Warlow:

Congratulations Lyle! For your first deal and in this market where it is difficult to find anything that cash flows, I'd count this as a big win!

I am in a similar boat where I am looking for my first house hack, but it seems near impossible to find right now. I also recently learned about assumable loans, and I was curious what tools you used to find the assumable mortgage? I tried using Assumableloanfinder.com but it has been returning absolutely no results for me. Any suggestions?

Hey Tyler. I used assumelist.com. It wasn’t the best website and it cost $50 per month to be able to see the approximate interest rate and amount of equity you’d need to buy out. In hindsight that $50/ month was way worth it since I landed a pretty good deal.

It’s a really tricky thing because the mortgage can’t be too old and can’t be in a too high appreciating market because then the equity buy out will be too expensive but at the same time it can’t be too recent cause the interest rates are too high.

If you could find a way to locate all FHA, USDA or VA loans from 2021 and reach out to homeowners to see if they are selling to willing to sell. I found 2021 was the sweet spot because the interest rates were still low but equity wasn’t too high.

if you are just going to watch assumelist or other website you need to be patient because inventory is low for low interest rate houses (no one wants to bail on there 3% mortgage to take on a 6% mortgage). I almost gave up on a duplex and just assumed a single family instead but finally this one popped up and luckily the seller was cool with it.

Quote from @Jules Aton:

Even considering an acceptable amount of fixed interest on your outlay if you can gross 4k month this sounds like a home run to me especially for your 1st deal. 

Thank you! I figured a home run would be if the rent from only 1 of the 2 units covered the entire monthly payment but I guess in the current market it’s a pretty awesome deal. If you factor in the rent I pay currently then I am making out pretty good. 

As you all know, higher interest rates made house hacking way harder. Duplex’s are priced (at least in SE PA) where you can maybe cover half your mortgage. I was turned on to assumable mortgages just by the luck of a random conversation.

I set out looking for duplex's for sale that were currently under FHA loans (all government loans are assumable) and finally found a place where the sellers had a sub 3% interest rate and were open to the unconventional sales process.

IT TOOK 8 FRICKEN MONTHS!!!

luckily the sellers hated the marketing and open house process and hung in there while we worked it out.

It cost me a total of 141,000 including closing costs to take over the house at a $410,000 purchase price and I assumed their 2.375% loan with 25 years left on the mortgage. My monthly payment is about $2,000 and each side of the duplex should rent for $1,800 to $2,200. 

It’s not exactly a home run but after finding bigger pockets 8 years ago and grinding trying to make something work I finally feel like I made the first step.

Quote from @John Cardinale:

Quote from @Lyle M Smith:

If anyone was curious of the outcome…

The owner missed our appointment for the second day in a row. Both times he lied about being on the way cause then he admittedly said he could leave his house cause he couldn’t find the keys. This time he at least gave me permission to go in if I could get access.

The doors were jammed shut but just from friction so I was able to push them open. The 1 bed room apartment was completely trashed and the layout was pretty kooky. The ceilings were prob only 7 feet and there was extensive water damage. The main 3 bedroom part of the house wasn’t too messy but it probably hadn’t seen and maintenance or updates since the 60’s. Needless to say the property was a full gut and then some.

I still liked it but I started to lose hope after calling him to share my thoughts. He can’t get my name right, he thinks it only needs 5 grand to start renting it, he’s 68 and was a career land(slum?)lord. He wants 239,000 but it prob needs $150-200k and he claims he’s not taking much less than his asking. I slowly worked up to the idea of working out financing between us but he batted it down quickly. I plan to offer him $100k and expect an offended denial but at least he’ll have my offer if he reconsiders.

…on to the next.

Don’t be discouraged! This can be a common scenario for off market properties as they are for sale by owner and in their current condition for a reason, that being the owners often think their real estate is much more valuable than it really is. If he approached a realtor, with an over-priced listing proposition I’m pretty sure the real estate agent wouldn’t waste their time listing and showing it. This owner doesn’t seem like he has the right motivation you want to see in a seller. He may be motivated by price only and thus doesn’t need to sell. 

You're spot on. Thanks for the encouragement. I was thinking of making a professional itemized invoice for the rehab costs to try and prove to him my price is fair. Only an investor will buy this property with the condition it's in so maybe if I can convince him 200k needs to be knocked off the ARV for a purchase price to make any profit he will settle.

There may also be a better deal with an easier rehab that my realtor found so maybe it’s for the best. Can’t force a deal to happen!

If anyone was curious of the outcome…

The owner missed our appointment for the second day in a row. Both times he lied about being on the way cause then he admittedly said he could leave his house cause he couldn’t find the keys. This time he at least gave me permission to go in if I could get access.

The doors were jammed shut but just from friction so I was able to push them open. The 1 bed room apartment was completely trashed and the layout was pretty kooky. The ceilings were prob only 7 feet and there was extensive water damage. The main 3 bedroom part of the house wasn’t too messy but it probably hadn’t seen and maintenance or updates since the 60’s. Needless to say the property was a full gut and then some.

I still liked it but I started to lose hope after calling him to share my thoughts. He can’t get my name right, he thinks it only needs 5 grand to start renting it, he’s 68 and was a career land(slum?)lord. He wants 239,000 but it prob needs $150-200k and he claims he’s not taking much less than his asking. I slowly worked up to the idea of working out financing between us but he batted it down quickly. I plan to offer him $100k and expect an offended denial but at least he’ll have my offer if he reconsiders.

…on to the next.

Quote from @Jeremy Greenamyre:

I think you need more info on what the seller wants. I’ve done a number of off-market and/or seller financed deals, and highest price isn’t always the determining factor.

I definitely do. I planned to ask him what he plans to do with the proceeds, if this was his main home or an investment property, if he owns his new home now, etc. Unfortunately he didn’t show up for our showing this morning so I have until tomorrow night now to plan on what to ask him. let me know if you have any other questions for me to ask him.

Thanks Misty. I haven’t yet uncovered his debt on the property or what he intends to do with the proceeds from it.

I do know he purchased it in 2005 so chances are he has a relatively small balance on his mortgage but maybe not. I don’t think he needs an upfront lump sum based on some assumptions. He’s been listing and delisting the property for several years now so that tells me he’s not desperate for the money, also he is retired so he may just want some extra spending money. Also he mentioned he is now living in one of the wealthier counties in my area so sounds like he already has another house so he doesn’t need to 1031 and it’s not una cheap area.  (I know - a lot of assumptions)

I’m hoping he cares more about making the largest gain on his investment versus how quickly it’s paid out. In the event he wants the money quickly but not necessarily instantly I was thinking of offering to pay his asking price with $1000 monthly payments for the first year with a balloon payment on month 13. That will give me a year to rehab it, rent it, generate some cash and refinance to pay him back

Quote from @John Cardinale:

It’d be a good idea to prepare for both scenarios, traditional financing and seller financing, so presenting 2 offers that work for you. Once you see the house and have a rehab budget then you’ll be ready to crunch numbers. 

Good though - thanks John. My issue is I make the majority of my money in commission and my lender said I need two years for it to be considered. I may qualify for this one but I don't really want to put 50k down anyways. I believe it needs to be move in ready for any low down payment scenarios like FHA. Maybe I can do a DSCR since it could pull in 3000 in rent?

I suppose I’ll just bring up how his neighbors duplex sold for 135k but I will come up to his asking price if he will hold the note. Or if he wants a lump sum I’ll need him to pay closing costs and come down to 175k or something. that makes down payment more manageable and I could get it back with a cash out refi. We’ll see

Hi All - hoping I can brain storm with some of you more experienced investors and creative financing connoisseurs.

I found a duplex outside of Philly. Really nice older, retired gentleman. Had a good conversation with him on the phone and learned he is looking to get $239,000 for his duplex. It’s an old house and needs work. I’m going to see it tomorrow so I don’t know rehab costs yet but I’m trying to be prepared to discuss potentially having him finance it for me.

The rental calc tells me I could at least break even while living in one of the units but I’m thinking I could improve the cash flow if I could get him to give me a low interest short loan with a balloon payment. I was thinking I could give him 20k cash and his asking price , which is high. A near by duplex sold for $135,000 and an investor is flipping it for a little under $400k.

My dad and I run an HVAC business and will serve as our own general contractors. I just want to find a way to acquire the property with a lower monthly payment so it can cash flow.

If anyone has any suggestions on how to structure a seller financed deal so that it might be attractive to the seller himself. I would love to hear your input!