All Forum Posts by: Craig L.

Here's the scenario. 5-unit house listed for $180,000. Cashflows nicely at that price, even at $200,000. Don't have the capital to put down 20% on your typical commercial mortgage, and the seller doesn't want to hold a note for 10% to get into a 80/10/10 mortgage. Since it is still a good deal at $200,000 I am considering doing one of 2 things:

1) Offer $200,000 and seller carries back 10% at very low rate. Seller gets $180,000 that they were asking and an extra $20k note they weren't even asking for.

2) Offer $180,000, then wholesale (double close?) it while under contract for $200,000 offering the buyer only 10% down and you will carry back 10%. Use the buyer's 10% down and extra $20k difference in escrow between the purchase prices to buy it from the initial seller without any of my own money. Sell it to the second buyer, carry back a note for $20k essentially for nothing.

Anybody done this or heard of it done? Is it feasible -- legally, lender-wise?

Under contract.

Not by me. :cry: A few days late, apparently.

Ah, yes, I forgot to mention that the rents are below market. They are at around $425/mo each, and should be at least $525 possibly even higher.

Will report back once the realtor gets back to me. I'm hounding his voice mail.

Right, Ryan. My bad on the cap rate calculation.

The listing claims the property to be fully rented, but I'll request the financials and current leases.

As far as the financing, thanks for the info Scott. It was at romaxcommercial.com that I found the 90% LTV, Secondary financing allowed product. I am going to look into it today. When you talk about No Doc/Full Doc commercial mortgages, I was under the impression that commercial lenders will look at the property alone to determine whether the income it produces will cover the debt service by >120% and that my own personal income is irrelevant. Is this not true?

Thanks for all the feedback. I am going to inquire about this property this morning.

10 unit building in a decent part of town. Gross annual rents are $52,000 (tenants pay utilities). Asking price is $170,000. No, that isn't a typo. Cap rate is 31%.

I doubt this one will last long on the market. I don't have enough capital to put 10% down, but I am thinking of offering $180,000 if the seller will carry back a 2nd mortgage at $18,000. I have seen multiple places online offering 90% LTV commercial financing with subordinate financing OK.

10% seller @ 7%
90% mortgage @ 7%
Estimated monthly payments of $1200 P+I.
Expenses estimated at 40% gross = $1720
Gross monthly rents = $4300

4300 - 1200 - 1720 = $1380/mo. = $138/unit/mo. cashflow

Am I crazy or does this sound completely doable? Would I be crazy not to put in an offer sight unseen ASAP?

Does anyone know the parameters for HUD bidding in New York state? Is 85% of new reduced asking price the minimum net HUD will accept?

If realtor commissions are not negotiable with HUD, I'm assuming you could ask the realtor to rebate you a percentage of their 5% commission.

Roofs confuse me.

I know that issues with a roof can make or break a deal or turn a big profit into a loss, but I'm a bit lost in the roof lingo. When a listing claims "new roof" can this mean multiple things? And what does a "new tear-off roof" mean, if something different?

I'm told it only costs $1.5-3k to put new shingles on a roof. And I'm also told it costs a whole bunch more if you have to repair/replace the actual hardware of the roof. What warrants either one, and what is the best way to evaluate a roof when you're looking at a property? Can your average general contractor find roof problems?

Thanks for any help!

I'm a runner. When I'm in shape I average 70 a week. Run a few marathons myself, and plan to do the Ironman someday. I usually go check out new REOs and HUDs on my daily run -- good way to save some time.

I wonder if purchasing the mortgage from the bank would solve some of these issues.

DealFlies,

Care to expand on the effect of the Home Equity Protection Act in NY on short sales? I've heard a little about it, but didn't think its ramifications were that drastic.