All Forum Posts by: Will Porter

Great ideas. The seller initially insisted they wouldn't owner finance, but it's hard to argue with terms like you're suggesting. I'll see if I can make something like this work.

I have a lead on an 11-house package deal in a town on the outskirts of Houston, TX. It's an older couple that are tired landlords and are ready to get out, but they don't want to owner finance.

• Asking: 445,000 for 11 houses (all shapes and sizes; a few duplexes, mostly SFRs)
• Cash flow: 1,544/mo on the whole package (calculated with 100% financing at 8% in the BP calculator)
• Cap rate: 12.96%

Does anyone have ideas for how to finance the purchase of this package of houses? I don't have $445k sitting around to pay cash, and I'm not really sure how I could do hard money or BRRR when all the houses come under one financing package. And of course 11 houses at once will make any conforming lender run and hide.

Seller is refusing to allow me to cherry pick houses, understandably.

Any ideas for how to proceed on this?

Thanks!

@Marty Rini it looks fantastic!

Can you tell us the details of your project? Would love to see the numbers but also curious how you funded everything and did the work, especially since it was a live-in.

Well the numbers in my example aren't real so don't focus on that, I was just asking about the concept. You would have to make it work within the lender's LTV requirements so you're right that they wouldn't be lending 100% LTV.

As for the reason why, it might be an extended family member, or some other side agreement that you have with the sellers, or whatever. Again it's about the concept.

I'm trying to think of other creative ways to fund rehabs without having to save up tons of cash.

Right, and that's the main thing I was trying to confirm -- if the entire closing still yields a final result that is below market value, the bank isn't lending "phantom" cash, they're lending against equity in the property.

I just wasn't sure if they would actually see it that way...

And I should add that obviously this would be done with full disclosure to all parties. No secrets, people. I'm just wondering if this is even possible.

It's my understanding that using seller's cash-back is fraud when you are inflating the price beyond market value. Here's an example:

Scenario 1

• FMV: $300,000
• Sale Price on Contract: $350,000
• Cash back from sellers for repairs: $50,000
• Net to seller: $300,000

In Scenario 1, the buyer and seller are inflating the value of the house above FMV to cause the bank to lend extra money for repairs. In effect, this causes the bank to unknowingly lend more than 100% LTV and is clearly fraudulent.

But what if this transaction takes place below the market value, where the bank still enjoys a comfortable LTV? Example:

Scenario 2

• FMV: $300,000
• Sale Price on Contract: $240,000 (which is 80% LTV)
• Cash back from sellers for repairs: $50,000
• Net to seller: $190,000 (because they are motivated and don't want to do repairs!)

In this case, the seller is willing to walk away with $190,000. The buyers have a note for $240,000, but they also have $50,000 cash in their pocket for repairs. The bank is sitting on a nice 80% LTV loan.

Anyone ever tried anything like this? There are tons of Google results for Scenario 1 (clearly fraud) but I can't find anything about Scenario 2.

TL;DR: Has anyone bought a house below market value and used seller cash-back to pay for repairs?

So if we need anything local we can post about it here? Hopefully people will see it, good idea.

Go @Brian Adams great topic! Excited to hear about his training you want to do.

 I really like these suggestions, and a huge +1 for Android app.