All Forum Posts by: Nathan Owens

I am hoping to find the best solution to this situation described below. Ultimately, I am looking to purchase/refinance with or without my siblin co-borrowing, then put an ADU on the home to rent out.

My siblin is on the title to my late grandmothers home. The current mortgage is still in my Grandmothers name and payments are up to date. The note on the house is $160K. Zillow "estimates" the home value @ $443. My siblin has a credit score in the low 600s and Annual income of $40k and my credit score is in the 785 range with annual income of $170K. I will not be living in this home.

My thoughts;

Put myself on the title now, then wait the seasoning period. Cash out Refi w/wo co-borrowing with my sister for 75-80% LTV and use remainder after note is paid off for ADU. (I'm worried that my sisters lower credit score will negatively impact interest rates)

Purchase the house outright for $160K , pay off the note, wait 6 months seasoning period and take a HELOC out for AUD. (I'm not sure how this will play out regarding the value of the home and only paying $160k. How will this affect myself and my siblin regarding the IRS in terms of gift of equity, etc.

I have spoke with a couple lenders that really can't think outside the box, and don't know how to answer these questions. Can you help?

@Justin Tahilramani

I may have missed it, but would you mind sharing the lender you are working with?

I currently have 3.625% myself and would jump on that offer if possible!

Investment Info:

Small multi-family (2-4 units) other investment in Amesbury.

Purchase price: $305,000
Cash invested: $30,000

I bought a single-family home with a detached "carriage house" at the end of 2016. I then put around $30,000, finishing the carriage house in NOV 2017.

What made you interested in investing in this type of deal?

I initially bought the house and planned on having the most badass mancave in town...

How did you find this deal and how did you negotiate it?

I had a buyers agent and looked at a few houses with him, then on a Thursday this property popped up on Zillow. They had an open house scheduled for sat-sun and I was going on a cruise to Bermuda that Saturday. I called my agent and asked if we could get in to see it on Friday. He made it happen! The seller was asking $325k and I ended up putting in an offer for $290K while I was somewhere on the Atlantic Ocean between NY and Bermuda. The seller countered with $305k and we accepted!

How did you finance this deal?

I was able to finance this by pulling the $30k from my 401k and a lot of sweat equity. I essentially have the renter paying back the loan, and then, once the loan is paid off, I will raise the rent. In October 2020, the loan will be paid back plus the standard 3% when taking from 401k, and I will have a $1,500/month cash flow. (or would this just be considered $1,500 off my mortgage???)
Not sure if this was the most conventional way or smartest way, but here we are.

How did you add value to the deal?

The work included:
Full bathroom- framing to finish. Plumbed with macerator to connect to main-house plumbing.
Kitchen- framing to finished again plumbed to the macerator.
Large master bedroom with walk-in closet- framing to finish
All electrical
In-wall heaters in both bedroom and bathroom (The only source of heat was the existing pellet stove down-stairs in living-room)
Upgraded heating to MiniSplit system upper and lower level NOV 2019

What was the outcome?

Happy tenants
Happy landlord (cant wait for that $1,500 to come in)

Lessons learned? Challenges?

You can learn a lot from YouTube
The pros make mudding and taping look easy on YouTube. Tried and failed, hired a prof.
The squeaky wheel gets the grease (with some contractors)

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Super sad but my real estate agent unexpectedly passed away around a year ago. Nicest person you could meet who was loved and respected by the community.