All Forum Posts by: Michael Rhodes

Lets say I can work out a deal with him and he can maintain his current bank mortgage,  What legal papers between me and him would let me be able to deduct the mortgage interest and taxes, when those mortgage docs would still go to my buddy with his name on em?

bump for input.

So no other methods to make this work for all parties?

I agree that could be an issue.  I'd say he prob earns 2x what he did 10 yrs ago when he bought this one, so he might qualify.   I need to deep dive discuss with him without invading his privacy.

Even if he cant finance, I'm wondering if there could still be a workable advantaged scenario here where I do get a loan, but we at least avoid 10K in realtor fees to get the price lower.  Plus he wouldn't have to do little sweaky repairs to make it look spotless to a potential buyer.    The house is in fine shape overall.  prob just a little paint and deck stain.    I've known him 15 years, so it would be a trusted transaction, which I thought could be a good "safer" oath into my second rental.

I'm sure I'm missing some variables here, but thinking briefly, if I could put about 10K in his hand and "assume payments on his mortgage with maybe a promisory note that I'm buying it.  I know Im using the wrong terms here and will prob get blasted for my wordage here.

I also know he'll need to be able to buy what he wants, so this existing mortgage on his name may prevent him from being able to get approved for the next mortgage he wants.

Unless the paperwork showed I was buying it, or lease to own it from him.   But then would his current lender get word and call the loan back?    If he did finance it this way to me, would I have the proper documentation to deduct interest etc?

My goal of the rental would be to get about  $1250 a month, and breakeven to make a little bit each month and pay the house off as soon as possible.

Insurance will be about $1000 a year, and property taxes will be about $2000-2200 a year.   I think his current mortage is around $750 a month on a 30 yr.

I'd like to pay about $1200 a month total outlay to get it paid down. 

My current and only rental I get $1375 a month. Current tenants have been there 2 yrs and plan to stay 6 more.  It'll be paid off in about 7+ years. So could then really dump into a second to get it paid down. 

My wife and I gross about $165K-170K a year. 

I have one rental currently and want to pick a couple more good ones.  SFHs are my focus for what I hope are better clients and RE appreciation.  Not much concerned about cashflow, just equity and payoff so the home flows almost all profit in another 12+ years.

A buddy of mine has an 1200 sqft 3/2 in a decent area with good elem and middle schools and just ok high school.

He bought about 10 years ago at 125K.  Looking at zillow and comparables, seems like not much growth there since things fell after and now climbing back up.  Maybe 130-135 tops(?).  Maybe 125 even.

I am pondering if there might be a good opportunity get into this house with some creative but not complicated financing where I DON'T have to put 20% down and be advantageous to both myself and him.

On the surface, I figure he prob owes about 98K on the house.  If he sells with agents he'll lose about 10K.  If its worth 125K, and I could buy it for around 110K from him, maybe 115K, he can go find what he wants, no risk of waiting time to sell, and maybe we could work out some kind of seller financing where I put about 10K in his hand and go from there.  Saves me pulling out 30K PLUS closing costs and then holding some 6.5% RE mortgage rate to deal with.

I'm not sure how to go about this or how to present it to him.  He's a younger guy and planning to move across town and buy another house.  Not sure how much down he needs or wants for his move goal.  He's looking to move in the spring (unless he's motivated otherwise) and I'm sure he'd be interested in a less complicated exchange, with less effort and outlay of cash for him to "prep for sale".

Help and suggestions would be appreciated.  I don't really want to go into the private loan market.  That just doesn't sit well on heart right now with 2 young kids etc.  

@Ryan C.  Thats pretty much who I'm going with.  Do you know if there is an annual maintenance fee associated with their loans?  Otherwise, aside from the variable rate, it looks like a win win offering they have for an investment property loan.

I hate a variable rate, but since I'm only looking at using it for a few year instance, I dont see rates jumping so crazy fast that I cant get it paid off.  I would never take a variable rate on a long term loan.  

Ive been doing some reading about the quick napkin calcs of determining if there is goodr eason to buy a property or not.   I saw mention of someone buying 5 properties in one year @Ali Boone with creative financing.   I'd like to learn more about those methods.

My current best plan is to borrow on a HELOC on my current rental at 5.5% now, (variable), with a plan to aggressively pay back in 4 years, and the remainder of the loan conventional at 30 years.

I saw a couple listings for 120K-ish with 2 car garages that look like possible winners in the 1300 a month range, but further verification is required.  Interested in learning of other good financing ideas.  Not wanting to over leverage myself too much when I have equity in the existing rental to use.

@Grant Rothenburger Thanks!   I just want to be sure I'm not missing some aspect in which I should be looking at the bigger picture that I'm not.

I also know, most landlords want to drag their rentals out for 30 yr mortgages, with lots of interest, and more profit  up front now. My viewpoint has been that I dont need them to profit now, but I want to retire early and live on rentals down the road a few years so having profitable paid off homes seems to make sense for me.

@Amanda G. When I say saving for college fund. Specifically, we both have 401K type plans for specifically retirement purposes. We also both have IRAs that are technically a retirement vehicle in each of our names, but we are ear marking that money towards our kids college sicne you can pay for college from an IRA without penalty. However, depending on if our kids end up getting scholarships, or some other means of college, or if online college becomes way more affordable and they dont need all of the money, then it'll just sit there as part of retirement goals, padding the bottom line further.

Also, being that my goals are for paid off rentals within 18 years and I have a 2 yr old anda  6 month old,  then when that time comes, I'll have cashflow from a few avenues to help with my livings costs, and their college costs at the same time around the same window of time.

@Grant Rothenburger  I am less interested in the cash out refi because..

A. I'll lose my 3.5% rate I have now, and would be getting arond a 4.75-5.5% rate on the whole mortgage.

B. I'd start paying interest on money I dont need right now because I havnt found the enxt rental property I want to buy. The HELOC path lets me have access to the cash on short notice, but until I actually take some to use, I'm not paying any interest charges.

Also, any tips on knowing what a good investment $ per return $ would be?  I've heard 1.5% was good, which I took to mean, if I borrow 100K, then I'd want to rent for 1500 a month, but that seems unlikeless in this market.

More likely, if I can buy for around 125K, I can rent for around 1300.

I basically just want my money, or really rather my credit and borrowing potential to work for me as much as possible.  An 830 credit score doesn't earn me money by itself, but having a couple rentals earns me equity and tax advantages.