All Forum Posts by: David Morgan

@Account Closed thank you, I'll read up on wraps and land contracts. So instead of me paying the monthly payment directly to the lender, I'd pay the seller and hope they use it to pay their loan, is that the gist? 

@Kerry Baird -- thank you for replying! I asked the seller about that possibility last week, they wouldn't go for me renting it from them and then in turn renting it to someone else, even if they could approve or deny an applicant.

@Stephanie P. -- that's the plan, or at least make sure I could get one should I be able to close the sub2. You're probably right about the DTI, I hadn't considered that... but like you said, conventional isn't an option anyway.

There are a couple of local banks that do portfolio loans, so I'm putting together the info they've requested. Also looking at companies like Lima One Capital, 5 Arch Funding, and now adding US Commercial to the list ;)

I imagine the interest rate difference between a FICO in the high 600s vs the mid 700s would be worth waiting 2-3 weeks for. 

@Brent Coombs -- fair enough, thanks for replying.

I'm not a wholesaler. 

Here's the back story. A great family moved into a house I own about three weeks ago. They wanted to downsize from the home they owned, buy something closer into town for cheap and fix it up, and they needed a place to live in the meantime.

Last week sometime, I asked how everything was going in the rental. It's a great house -- it was my dad's -- and I'm psyched to have these people living there. They told me they are really happy there, but the sale of their house hadn't closed, and they told me more of the story. They had put their home on the market, it needs some repairs that they couldn't make happen without borrowing money, so they kept dropping the price. Eventually they got a buyer, so they packed up and moved. But the buyer didn't show for closing. By that time they had already paid moving expenses, they had the rental obligation, and they're still making their home payment. Add the financial strain that made them want to move in the first place, and they're in a bind. I can help with the rent, but even waiving it while they figure things out, they are under strain. They said they wished they could just walk away. 

I looked at their house, and there would be enough equity after repair costs to make it worthwhile -- especially if I could forgo the 25% down payment and closing costs of a loan. And, with their interest rate, the cash flow is decent. So I offered to buy it sub2 and refinance within a couple years so they could use their credit to buy something. I also offered to help them get it fixed up and rented if they wanted to do that instead of selling it. They didn't want to deal with it, they want to be done and were cool with sub2. I told them it's not a good deal for them, and I have encouraged them to re-list their house while I figure out this sub2 business, they might get a better offer.

It has occurred to me since then that maybe I could JV with them to get the repairs done so they could get a better price.

And -- you're absolutely right -- financing is a bit of an issue. I put a down payment for a condo a few months ago on travel credit cards to get the points, then transferred the balances to 0% cards, and had planned on just paying most of that off next year when the introductory rates expire. I knew my FICO would suffer, at least temporarily. But I hadn't expected to need my credit, and I could hang onto my capital. That was the original thinking, I'm not sure how wise it was, but that's what I did. Anyway, I paid most of it off last week so that my score will make me a good lending risk, and my FICO should pop back up over the next few weeks. Another factor, I left the employed world in February to become a 1099 contractor, so a conventional loan is off the table for awhile. I've found a portfolio lender, and I'm working with them to make sure that if the sub2 note is called, I could get it covered. I do have other collateral, so I don't expect financing to be a problem once the credit score pops. I don't want this to come back on the seller in any negative way.

I COULD refi another house to get the money for a down payment to buy this one in a normal way, but that would delay things even more -- wait for credit score, get appraisals, and so on. Maybe I could get a blanket loan that would take care of the downpayment. I will explore it.

So there's the whole story.

What's the right thing to do here?

I'm striking out finding a lawyer or title agency who will close a sub2.

Telling them I understand and accept the risks involved hasn't worked.

Are there magic words or a secret handshake?

If I go to the register of deeds and go back 70 years, then look at the title chain from then forward to present, could we simply do a quitclaim?

Any thoughts?

You can definitely get started with $10k. We bought our first house from HUD a couple years ago with a FHA $100 down deal (plus inspection and appraisal). The loan included a few thousand for minor repairs. A 4plex came up a month later, same kind of deal. But... I haven't seen that kind of thing since. Hudhomestore is fairly bare of inventory around here. USDA loans are also phenomenal if there's someplace near you that qualifies. I don't know about qualifying for FHA or USDA when your downpayment is borrowed. But I do know, where there's a will, there's a way. I have no doubt you'll make it happen. Sometimes there are gems hiding in plain sight. I just closed on a trashed 4br double wide on 1.5 acres for $8400, including closing costs. Got it on auction.com. No one else bid on it. I can sell the home for $5k, let the buyer haul it off, and use the proceeds plus a little more to prepare a 2nd pad. That's $500-$600 a month income from renting the two lots, and even though I'll have to pay short-term capital gains for selling the double wide, I'm all in right around $10k out of pocket. Sure, I'll have taxes and insurance, and I'll have to pay to have someone pump the septic every few years. Anyway, point is, there may be great deals other people just don't like the looks of, so be ready to pounce when the opportunity is right. Have fun with it!

@Nick Mauldin Thanks for piping in. The reason I'm not going ahead and borrowing against this property or doing a 1031 is that I may need the equity right away if a sub2 note is called.

@Carl Fischer Really good advice, thank you.

Crowdfunding, if this is money separate from your emergency fund.

If I move a rental property in my name with no debt into a single member llc, what's the best way to keep the llc poor, put a mortgage on it through a separate single member llc? If that's the case, and I later decide I want to get cash-out financing, how would that work? Any advice?