I Need Help Structuring A Deal
Seller inherited house, moved out of state. sfr with a reverse mortgage due in 30 years, she collects rents of $2200 monthly. but wants to sell @ what the reverse mortgage is of $179000. Can a deal be done?
Sounds like you have a good deal if you can get a loan. But it would be a high interest (and closing costs) commercial/investment loan with the renter in there.
I also suspect there is a substantial early payoff penalty involved.
But at 179k, its certainly worth the effort to find financing.
Good luck
Yes, I too suspect early pay off penalty, the seller has been trying to sell for some time--mostly to investors with no one coming up with anything.
Guess again. The reverse mortgage ballooned when the prior owner died.
The rental of a house financed on a Reverse Mortgage is a violation of the terms of the mortgage. There are significant penalties.
There is no pre-payment penalty but this deal needs to be done quickly and before HUD figures out the borrower has passed away.
Not sure what the "structuring" part of this transaction is. Get a loan. Get a deed. Pay off the existing mortgage.
[ Edited by commercialking on Date 10/13/2009 ]
Well, in this case its pretty easy. Take your occupancy over the last 3 years in the building you already own. Think about the new building, is it going to be easier or harder to rent? Adjust the first number by these assumptions.
In my local market, it is taking about two months to turn over a property. If you were asking me this question for my market, I would tell you to use a 2 month vacancy allowance per unit, per year.
If you are looking for a percentage, one month equals 8.33%, so two months would be 16.66%
As CommercialKing already said, your best estimate will come from your experience with your own property.
Thanks for your help. I appreciate it, I am further down on my analysis sheet. I need to know how to figure out the maintenance/repairs, accounting/legal, advertising. Anything else you may think of too. Also, is there a good way to figure out what my mortgage will be?
Thanks!
Since you already own a property on the same street for three years, I think that you already have the answers to your own questions. Take your numbers for your property and average over the past three years. Break the number down to a per unit basis and use that for your analysis.
For example, if it cost you $1000 last year on your 5-unit, you would break that down to $200 per year per unit and the 3-unit would be $600.
Also, you know if your costs have been increasing or decereasing over the past five years and adjust your numbers accordingly to reflect your current market.
Actually, I think you are in a better position than most because while others will have to use their best guess at numbers, you actually have tru pre-forma numbers that apply directly to this new unit.
Good luck.
JS.