All Forum Posts by: Michael West

@Kevin Sobilo thanks for the response! I've been digging deep into this matter and the first thought I had was the same about the insurance. My insurance guy has a policy that would indeed do that as well as one that would cover up to 30% property value for zoning issues. The lender says that would do nothing for this deal.

It's my understanding that the buyer does qualify for the loan on his own personal income, but they were also looking into doing it using the rental income. In the end it appears that a big part of the issue is that the loan is being sold through Fannie/Freddie and the end product on the note needs to be able to remain the same as is. Duplex to Duplex. If the lender were holding the loan in house or as a portfolio, it sounds like they may be able to do it, but it's not possible for my buyer as the terms on that is beyond what he can afford.

So, I have an interesting situation here that I've never come across before and could use some additional insight from other's experiences.  I have a client who is buying a Duplex with intentions to make his primary residence, live in one side, rent the other.  He's fully approved as a buyer, however, it appears that the property itself is in an R1 zoned area and is "grandfathered" in as a duplex.  So, on the appraisal it is "legal non-conforming (grandfathered).  This then caused a question to be raised by the lender asking the city's zoning department "If a catastrophic event occurred that required a complete rebuild of the property, would they allow for the zoning variance to continue to allow it to be rebuilt the same as it is - a duplex."  The city said "absolutely not.  It must be compliant with the current zoning."  This shut the deal dead in the water. I've been told that this is a Fannie/Freddie requirement, yet not a single other person or lender has ever experienced such a thing.  To make it worse, we found another property in a completely different city to move onto and its going to be the same exact situation. My buyer is currently homeless after selling his former residence a few months back (with a different agent). 

I don't know that I'm fully believing what I'm being told and looking for someone with some experience in this to confirm or deny this as true.  What other options might we have.  Portfolio, hard/private money options are not within my buyers means.  Seller's are not willing to provide seller financing.

Hi everyone, I'm looking for a bit of advice regarding this matter. I have just closed on the purchase of a duplex with both units occupied. The two tenants are related to each other. During the purchase process, one of the tenants decided to stop making payments and since the original owner had passed and I was purchasing it through their trust, they did not want to deal with any of these issues prior to closing. So, I am inheriting this tenant as delinquent on day 1. How would you approach this?

@Tanner Connelly what kind of fees did they charge you? I just reached out to the city earlier this week and waiting to hear back about more info.

@Drew Sygiti don't believe there would be an egress problem as both buildings have their own driveways. I reached out to the city and I'm waiting to hear back from them. It sounds like it may be possible, but there are some hurdles. I would be able to create nearly 100k of equity by doing so, so I really hope it's possible.

I'm in the process of buying a package of properties from a seller in Michigan and found this rather interesting situation...

There is a 1400sq ft Duplex and an 1100 sqft colonial (plus a garage) all located on ONE parcel of land. I'm buying them both and using a DSCR loan to pick them up as they are all occupied units. There are no comps that match this same description in the whole area. They are both in decent shape, but need a handful of items to get it to pass code and are a bit outdated cosmetically, so there is room for improvements and rent adjustment. I'm picking them up for $145k total.

So, we got the appraisal back and they ran all of the numbers as a TRIPLEX (which is one of the ways I also did it before buying) and it came in right at value. I know this is a non-conforming property and they were simply treating it as three units for comparison, and I don't disagree with that method. However, I know that if it were able to be comped separately as a Duplex and a SF, I would get values of approx. $120/$110 separately for a $230k total value (AS-IS).

Ideally I want to exit this loan as a BRRRR or possibly sell one of the two buildings separately.

Can I split the parcel to accommodate this concept? How do I go about doing it? Are there any issues that would arise with the lenders if I did so?

I'm discussing buying a package deal from a seller who is open to the concept of seller financing part of the deal. Neither of us have a ton of experience with this and are looking for a bit of advice. The total purchase price is $240k and, although I can bring the down payment, I would rather keep my capital available for the necessary repairs. The seller is willing to fund part of, and possibly the entire down payment because they like the idea of receiving the majority of the cash up front, but also continuing some passive cash flow for a time to offset the taxes.

Can someone explain to me with a bit of detail, how this would be structured and presented to the lender?

Would cash actually have to exchange hands first, like a private loan, or could this all be worked out at closing with the title company?

@Minna Reid Thank you so much for your reply, I appreciate it. You make a good point about her credit being affected by the missed payments, I could see how that may cause a hindrance on a new loan. As far as the issues with already having the current mortgage still in her name could be worked around by showing the new lender that the mortgage is being paid through the initial lease agreement with me. I don't know a ton about mobile home parks, but I've heard that several near my market have their own lending programs. I'm not sure how they differ from traditional mortgages, but a few former clients of mine that were unable to acquire a traditional mortgage were able to do so through a park. One of the nice parts about this is that when someone purchases a mobile home without land (what my client is looking to do) they do not pay traditional property taxes and have no options for homestead exception. So, she may be able to keep the subject property in homestead for a time until we officially transfer ownership.

You also bring a good point up about putting myself at risk here as well, and that's really one thing I want to get some more feedback on so that I can prepare or structure this concept/agreement to reduce those risks.

As far as the 21k loan payback, the loan is tied directly to the owners and due upon sale or transfer of ownership. So, it is something I would like to address and help her find a solution for, but if things go south with the deal on my end and it comes due, it won't fall on myself.

I have also thought about the idea of catching her up on everything and make an agreement to become an equity partner with her. I would put in a smaller amount of cosmetic work into the property while she lives in it as normal, and then when ready we could sell it on the market and split a percentage of the profit. Not sure if that would be better/simpler. I personally love LTRs and building that portfolio, but I'm open to anything that would help out.

I like to consider myself a problem solver and really enjoy helping people out of touch situations. I'm wracking my brain on a few ideas and looking for a bit of insight or advice on a creative strategy such as this.

I'm a realtor and also an investor with only a few deals under my belt, but looking to grow. I just left a listing appointment with an elderly woman who was taken advantage of by her lender through a series of misinformation. She went into forbearance over a year ago and upon it's end in December she was told that the entire amount owed must be paid back in full before they would even be willing to accept her regular monthly payments. They told her initially that it would have been pushed to the back end of the loan, but then changed that plan. They told her to stop paying until she could pay it in a lump sum. Now they are threatening foreclosure at the start of next month.

She owes about $9500 in forbearance and back taxes, but also informed me that she owes another $21,500 to the city for getting involved with a program to make improvements on her home 14 years ago that is due upon the sale or transfer of her home. Basically any activity that would remove homestead from it would be subject to that repayment. Fortunately she has equity in the house, though not as much as would be desired. We talked about listing it and plan to discuss this with her lender today, though ideally, we want to have the issues resolved before they even begin the foreclosure process in the beginning of April.

Here's my idea... Please let me know if there is a better or more simple way of doing this.

I believe purchasing the property with a subject-to would be great, except that it would trigger the $21,500 due on transfer cloud with the transfer of title. Instead, I'm thinking that I'd like to create some kind of lease-option or land contract agreement with her so that the property stays in her name where I pay her a down payment of the amount to get her out of foreclosure and a bit of cash for her to use as a down payment on a mobile home (which is what she wants). The option amount would be at a price TBD or at $0 when the mortgage is paid off. Then, I would sublet the property back to her for a short term (6-12) month contract while she looks for her new mobile home at a cost equal to her current mortgage (so can stay comfortably for a time with no increased expenses).

When she has moved out, I would make improvements to the property then lease it out to new tenants at market rate until I'm ready to finance out of the deal and would pay off her debt to the city for those repairs.

The potential cash flow at her current mortgage rate would be excellent and with significant improvements there can be a lot of equity built. (I'm thinking general cosmetic updates + possibly adding an addition to increase the bedrooms/baths from a 2/1 to a 3/2 or 4/2).

Am I thinking of this too hard? Do you think this is feasible? I know she would be interested in taking this option if possible. Are there possibly other risks or concerns I should have?

Hi everyone, I have a potential opportunity falling in my lap and I'm putting together some options for a win-win scenario for my seller and myself. The seller is an elderly woman who recently lost her husband after he had put their mortgage in forbearance a year ago and is now being faced with possible foreclosure since they are calling for full payment of the amount due from forbearance. She feels the need to sell the property to get out of this situation and possibly buy a trailer to spend the rest of her days in with the revenue from it.

*Note* I am a licensed realtor and I consider myself a problem solver.

The idea of putting it on the market is completely open and I would gladly represent this house for her as my client. I've ran some comps against the number she would need as a bottom line (after all fees) to catch up on everything and move forward the way she wants and it will be close call to make happen due to the property condition. However, she is also in a bit of a battle against time with the foreclosure being filed and may cause a handful of additional hoops and stress on her that this woman does not need.

Here comes one of my potential solutions:

The Subject-To.

I would love to help her out and also invest into this property. I have this idea that I want to purchase it this way and getting all of her fees and delinquencies caught up, while also possibly let her remain living in the property with a lease-back agreement (she is able to make regular monthly payments at her current mortgage. They were mislead by someone to go the forbearance route). Her current mortgage is attractive to me and eventually, putting money to fix this property up would yield a great ROI and make for a wonderful BRRRR option in time.

I've never done a deal like this before (subject-to), and I do understand the due on sale clause and all of that. I feel comfortable with solving that issue if it comes forth.

My questions are this:

How is the purchase agreement different using this method of transaction vs a normal PA? Are there specific clauses or wording that should be used?

I know that the mortgage stays in her name, but how do I make it so that I'm the one actually paying it directly?

As far as title transfer goes, is it the same as a QCD?

Any help or advice with this would be greatly appreciated. Thank you,

-Mike