All Forum Posts by: Wes Brand

The loan amount is ~60k. The up front money I need to for the loan is ~30k. (Or, I'd be able to pull 60k out of the property, and leave 30k in it or fees). My bank won't touch it because they don't want to deal with loans that small...probably for this reason.

Would a line of credit against the home be a better option?

What is 'instant equity'? 

A bit about what I'm looking for:

I'm closing on a property soon with a cash offer. I have no immediate plans for the money I'm spending on the property, but I'd like to keep cash available so I can jump on any good deals that happen to pop up without having to secure financing first.

I was originally planning on doing option 1 below, but then I looked at the actual loan costs+details, and the mortgage broker I was going to use made quite a few mistakes on the loan application (no, it's not a primary residence...). They didn't seem to think it was a big deal, but I'm not inclined to trust them very far anymore.

I'd like to avoid escrow accounts, since I'd rather keep track of how much taxes and insurance is myself, than trust the bank to screw with my payments and possibly mess up my cashflow. I'd like to keep fees to a minimum, since that's money I won't see again. One problem with the conventional mortgage route was I'd be paying about 50% of my borrowed amount up front (down payment + fees + prepaids), and, while I understand the 25% down payment, an additional 10% in fees+prepaids seems a bit excessive.

What I know of my options:

1. Conventional mortgage that closes before the cash offer closes. 
2. Delayed Financing
3. Cash out Refi
4. Line of credit against the house

Did I miss anything? Which would fit my needs best?

@Ned Carey I believe in this case the OP's friends are the ones with their name on the debt, and the OP is looking for a fair way to compensate them for taking the risk that the OP disappears/falls behind on payments. 

Don't forget to account for the costs to get rid of the hoarder after you purchase the place (if you can...if s/he just signed a year lease it might prove quite difficult)

Not an expert at all, but what about stained concrete?

I'd pass unless I'm reading the question wrong or you want to 'house hack' it...249k for 2200 - 2400 rent, your price is > 10x rents, so you don't even meet the 1% rule. (Not that you should take any deal that meets it...if it doesn't it's not worth looking any deeper unless you're house hacking or speculating)

If I do the repairs I end up with ~8% cap rate, if I don't I end up with ~11%. The deal is entirely cash no matter what. Do the numbers work out? Sure, it's still cashflow positive, but it's only giving me an 8% return.

True, but a bit pedantic. The market will definitely pay the current asking price for the place. The current cap rate, ignoring the repairs, is 11%. It may or may not pay the current asking price +25k in repairs. If you'd prefer I can say it's 8% CoC returns, with repairs, until I refi out, which gives me ~14% CoC returns (assuming I can't pull out anything extra for the repairs).

To me, it seems like those numbers are low -- it seems like I could get the same returns buying into a higher class neighborhood, and end up with an asset that needs (and potentially needs) much less work, but I'm new to this, hence my question...is this a good deal, or am I right in thinking that the returns I'm looking at make no sense for the risk I'd be taking on? (It's not in a bad neighborhood, but the house is 80+ years old)

I can put 25k into it, but that means ~2.5 years to make back the investment...

My thought is that the total I'd be spending on this place( little over 100k with my off the cuff estimate of 25k total for repairs) buys me into a better maintained place that ends up with the same cap rate.

You don't need to give him what he asks for. 

Counter with whatever makes sense to you. You can always hire a lawyer if you need to, but if he takes, say, 1 month's rent, you've just saved yourself a lot of trouble and money. 

You want him out, he wants money, why go through the work of an eviction? 

Pay him to leave; make him an offer that makes sense for you. Not sure where your rental is, but in some areas of the country evictions can drag out for a very long time.