All Forum Posts by: Derrick Strope

You will lose your EMD.

The best way to prevent this is to agree with the seller a time frame that works for everyone and complete your inspection on time.  You should have a broad inspection contingency in your contract (or even upon partner approval) and should you have no exit strategy you can terminate the contract.

Probably not a great thing to do to someone who is hoping to do business with you, I'm sure it would leave a bad taste in their mouth - so be sure of the deals you attempt to write.

http://www.biggerpockets.com/renewsblog/2014/03/21/ultimate-guide-determining-house-worth/

Agreed with @Devan Mcclish, it sounds like you would lose money if you were to go this route.

This does not sound very good, I would verify that your insurance policy would cover damages should a fire result due to welding in the home.  It seems unlikely.

Thanks @Andrew Wydra!

@Andrew Wydra thank you very much for all the great information.  I have collected all of that data above during the evaluation of the deal but did not think of presenting it to the lender in that fashion, I will definitely do that.

As we are still ironing out the details with the seller and the deal is not yet under contract, I opted to just go with a general question to a guy who was my closing agent on my primary residence last month.

Just to reiterate however, will the bank let me pocket 10k of their loan if the LTV is great?

Currently negotiating a deal for a pair of duplexes, offer will be 300k for both.   Subtracting the costs of the mortgage, property management, repairs, vacancies, propterty taxes, etc each door will cash flow $200/month.

These properties are owner free and clear by the seller and the plan as of now is to use traditional financing for 50% of this deal (down payment) and the seller will carry a second for the remainder - I will pay all closing costs/fees.

From what I have read, it seems like some banks will do this - some will not, I have already began reaching out to some lenders that I have worked with in the past for their 'blessing' on this type of deal.

Now my question, I would like to have some additional reserves available as the closing costs will likely tap me out at the moment.  Instead of financing 150,000 is it possible to finance say 160,000 so I can have a 10k reserve in the event that I have to deal with any minor repairs/bad tenents, etc in the beginning?  An additional 10k will only cut into my cash flow by approximately 50$/month but I think it would be very important to have some additional cash available when starting out.

Or would I have to close first and then add a HELOC on the remaining equity?

@Ray Eason

From what I understand about the process, you will need to open title once you find a buyer for your contract. Be sure to find a title company that doesn't charge cancellation fees beforehand. This is also the time when you will open escrow and deposit the EMD that the buyer should provide. Hopefully someone else can back this up for me.

@Luke Swab thanks for the response.  The property taxes are 1800/yr for each property.

I mistakenly above asked if this was a good deal, it was a mistake on my part because I have not yet vetted the numbers.

What I was looking for was if my understanding of the process that @Juan Maldonado had mentioned was correct in regards to finanacing with a traditional lender and the owner carrying a interest only second.

Also it looks like current rates for rental properties in this subdivision are going for between 1200-1400/month based on a 3bedroom/2bath.  My 1200/month is on the conservative side so if we went with the median it would equal 100/month profit.

Ideally, I would like to get more than that out of five properties but again I just wanted to see if the overall process I outlined above was accurate.