All Forum Posts by: Jonathan Newsome

@Andrew Postell Thank you for the vast amount of knowledge you bring to this particular subject! I was looking for a post that talked about this method in depth and I’m more than glad I found yours.

I do have 2 questions:

1.) I know you mentioned to use the LLC/lien method, which I'll more than likely be using, (and my 2nd question IS geared towards that method) but is it still possible to use the "Buy cash, delayed financing method" here:

buy/purchase a SF with "cash" (private/hard money lending to my LLC), include the repairs on the HUD (contractor invoice) and recapture the total purchase plus repairs with no seasoning, provided they meet 75% LTV of ARV? Scenario:

Lender lends to my LLC

Purchase price $50k goes on HUD form

Rehab $20k include this on HUD form

Closing cost $3k on HUD form

All-in $73k

ARV $100k

75% of $100k = $75k, lesser of two is $73k so can we recapture the $73k. <—— is this possible w/o seasoning, if we were able to include rehab on the hud?

2.) Just confirming I have this one down too, can I use a PML/HML to loan my LLC the purchase price + rehab cost and then in turn have my LLC loan me the funds for the purchase and rehab cost to fulfill your section 3 criteria? And In this instance would I need 1 or 2 liens (file 1 or 2 deeds against property at courthouse), 1 for PML/HML and 1 for my LLC or am I totally off?

@J Scott I know this post is a bit dated, but would you mind sharing how you would word your “kick out clause”?

@Dan Falcon awesome, again thanks for sharing the great info! Looking forward to hearing about your future Brrrr’s. Best of luck to you Dan!

@Dan Falcon what an awesome write up, thanks for sharing!!

I have 2 questions for you, when including your repairs on the HUD for closing, did you just have your contractor write you an invoice and gave that invoice to the title company to include when closing? Also, do you pay your contractor through escrow (draws) or all up front when using this method, I've heard of investors using different methods...

@Matt M. To be honest, I don't want the mortgage in my own name. It's currently fine where it's at and also, transferring it to my name defeats the purpose of a 'sub-to', doesn't it? If I wanted it in my own name, I honestly could just out right buy the property with financing. 

This is honestly a way where: (a) the current owner feels comfortable with an investor (me) assuming responsibility for the loan, (b) the owner doesn't want the property to go to auction, (c) the investor does not want to go through the process of obtaining a mortgage when one is already in place and set at a fixed interest rate, (d) both parties understand all risks involved. I have a few exit strategies, IF the Due On Sale clause is triggered and I've also explained that to the owner as well.

Also, I mentioned it in another post somewhere above, but I will be contacting the Lender to let them know of the current situation (through a signed Authorization Letter). I'm definitely not hiding anything from them, as I would hope that in explaining that I'm bringing the loan current and will begin making payments promptly, they will say that this is ok or not ok. Hope this helps explain my reasoning Matt.

@Joe P. I most definitely do not expect the owner to do anything whatsoever with the mortgage payment. Actually, the way it would be structured would be in such a way where I was personally making payments on the mortgage. I'd use a Letter of Authorization, which will allow me to contact the Lender and explain our situation; I will be the individual taking over and making the payments on that property. I'll explain that if any payments are behind, I will be bringing those payments current. The way I'd set up the payments would be in a separate escrow account, that way they can be disbursed from escrow account to lender on the date needed.

@Will C. You bring up a great point! So this was taken out long after purchase; it was an equity loan. They just got behind on the payments.

@Javier D. You're right. I called the owner back and turns out they HAD owed $2000 in HOA's. The thing is, the owners mother originally owned the property and passed away, so the owner took the death certificate to the court and the judge dismissed the fees, supposedly. I'll still do my digging but that's what I have right now.

@Matt M. I would assume the responsibility of the mortgage payment, but on paper they would still be the sole individual on the Mortgage.

@Jason D. Awesome! Thanks for the reply. That was what I was thinking too, I just wasn’t sure if there was any other creative ways of structuring this, so I wanted to hear from BP what you all would do in this scenario.

I had actually explained the sub-to in depth to the owner. I told them that I could pay the arrears of $5k, start making the monthly payment, and that would reinstate the mortgage. I would then assume the 47k loan and we would transfer the title/deed over to me (my business). They were already ahead of me; they stated, “it sounds like you’re going to pay my unpaid balance of $5k and get the deed/title?” I agreed and they were totally fine with that.

I was thinking of doing some light rehab for a sell, but the other option was to hold it as a rental or possibly structure a owner finance type of deal, though I’m not too sure of many people interested in buying/owning Town Homes... of course I could always market it.