All Forum Posts by: Mitch M.

Those taxes of $4,080 for a property worth $275,000 are crazy. Am I understanding right that this is South Carolina (known for low taxes?) and not New York (known for high?). 

Honestly, I would not be so close to walk away. You said yourself this can positively cash flow now, with the financing you were considering. I would see how the home inspection goes (get someone good) and make a assessment than on how you want to proceed. If you believe you can carry this place, without a negative carry, make any necessary repairs and can make changes to improve the rents... I would really consider moving forward. 

I would also make tenants start paying water, as soon as their lease renewal comes up, with a flat monthly fee. In addition to looking for ways to increase rent, as I said before. 

I'd shop around that insurance policy as well. I have landlord insurance on $1.5M houses, in wildfire zones that do not cost me that much. Maybe there is severe hurricane risk, but it is something I would look into. 

A 4-Plex for $275,000 is unheard of, and fourplex and muti-family houses do not come on the market everyday. Do not shoot yourself in the foot and walk away from what could be a great property. Just make a plan like I said, and map it out.

LaTonya, I would ask the lender making the loan what the provisions are. There might not be a balloon payment after-all. All I can say, is many of the 40yr Loans I have seen, contained a Balloon Due after 15 or 30 Years.

You should also ask and see if there is a Prepayment Penalty. This will likely result in you be asked to pay 6 Months of regular interest on the loan, should you decide to refinance or sale before a certain amount of time. I am okay with them, but I never accept any loan with more than ONE Year. Do not allow a Mortgage Broker to sell you a 3yr Prepayment Penalty. It is always better to pay slightly more in points or closing costs and have a one year, instead of a three. 

As for the Balloon, there is nothing wrong with that, if you are doing this wisely. The only money you are out is closing costs on a new refinance. You should expect to pay about 2.5% of the loan amount, when you do refinance. 

In your particular case, I would try to move forward and make this work. A 4-Plex for $265,000 is absolutely insane. But if inspection looks good, I would take it. 

What I would also do, is find ways to increase the rental cash flow of the building. When vacancies occur, obviously try to maximize value for yourself. In some parts of the sun belt, I have been told that you can collect far higher rents doing Section-8 than you can regular Tenants. The secret is tenant selection, and finding good tenants in the program. I have no idea if that is the case in the area where you building is, but it is something to research and look into. 

After a year or two in this loan, I would find a way to increase your monthly mortgage payment by about $600-700 a month, to knock out this balance and give you more opportunities when you want to refinance. I would not stay on the forty year payment cycle. 

Let us all know how this works out. I am rooting for you. 

I'll be honest with you, in my experience, I have never seen a Investor care typically about the existing financing, or what was owed on the property. I guess if you are trying to do a deal where the buyer/investor is taking over existing financing, but, almost every lender I've dealt with does not allow assumption.

Honestly, I’ve been around long enough to see 50-year loans, interest-only mortgages, and 40-year mortgages with balloon payments after 15 or 30 years. I’ve also dealt with loans where payments didn’t even cover all of the the interest owed each month—those deferred interest.

 With a 40-year mortgage, however, most of your payments go toward the interest, and almost nothing goes toward the principal balance. AND... A lot of them contain Balloon Payment Provisions. That is essentially a waste of money. You're better off opting for an interest-only mortgage, saving on payments, and then refinancing it into something more conventional when interest rates drop—or, if possible, making a plan to pay down the principal.

Interest-only loans, which typically last for the first 5 to 10 years of the loan term, offer two key benefits. First, they allow you to make lower payments during lean times, such as during remodeling, vacancies, or when you need to qualify for a loan before completing a renovation. But there's something else that many people don't realize: these loans  "constant recast" during the interest-only period.

For example, if I make an extra $400 payment one month, my interest-only payment will decrease the following month. You also have the ability to re-amortize the loan to suit your timeline.

Let’s say I have a $500,000 interest-only mortgage on a property. I make my regular interest-only payments for the first 7 or 8 months, and my interest-only period lasts 5 years. But if I decide to pay an extra $2,000 per month, in addition to my (dropping month after month) minimum interest-only payment, when the loan is recast to principal and interest, the new payment will be based on the remaining balance ($396,000) spread over 25 years. This results in a significantly lower payment after the reset. 

I've used this strategy on multiple properties, and it's worked well for me. Over time, I've accumulated more cash reserves and don't need as much flexibility, but I'm actually in the middle of a refinance right now using an interest-only mortgage—because the pricing with the lender and the corresponding ARM is more favorable than a comparable principal-and-interest loan.

The key with these alternative or "exotic" mortgage types is that you need to be financially savvy and have a solid plan. If you don’t, you could find yourself in financial trouble.

Title captures most of my question. I purchased a FIRST LIEN Purchase Money Mortgage that foreclosed, originally from 2006. The property had a first mortgage, as well as a second mortgage, both from the same purchase money lender.

After receiving the trustee’s deed and recording it, I discovered two “Independent Solar Energy Producer Contracts” recorded against the home. These contracts are both dated 2019 and appear to be lease agreements for solar equipment that I, nor the mortgage lender, were ever a party to. What's more, these contracts were never recorded before or during the foreclosure process, and the homeowner was actually in default on the first mortgage when they entered into these agreements. They were only recorded AFTER I recorded my deed. 

I’m curious about what my rights and responsibilities are in this situation. I have ZERO intention of making any payments on these contracts, nor do I want the equipment. I could care less what happens to the prior homeowner or if they go after him, as far as I am concerned.  The solar system adds no value to my property for rental purposes, and I may even be ripping up the roof & replacing it in the new year.

Beyond sending a nasty letter through my attorney via certified mail, demanding the company come pick up their equipment, am I required to take any further action or fulfill any obligations regarding these contracts? Can I charge them fees & rent for storage of their crap? It's a lease, not one of those clean energy assessment lien crap things. As you can tell... I am beyond furious they would pull a stunt of recording crap after I purchased the home.