Best Way To Tackle Property FREE AND CLEAR?
The seller owns the property free and clear. It's worth about $150k, she'll sell for $90k. It needs $10k minor repairs, otherwise it's a nice home.
I could take out a home equity loan to cover the 90k and borrow the rest from family to cover repair and holding costs. I could then just cut the owner a cashier's check and I'd get the deed. Howeve, I'd be maxing out the equity on my place.
OR
I figure I could just get a new mortgage on this place. But would this create problems when I try to sell in a few months because of seasoning? Also, would this most likely be more expensive because I'd have to deal with closing costs twice?
Also is the whole seasoning issue about time between mortgages or is it title....which would mean I'd still have the same issues going the home equity route.
Sorry, I know this sounds confusing.
First off, The numbers look good. Do the deal.
Between now and the time you sell the property, call some mortgage brokers. MORTGAGE BROKERS! INDEPENDANTS! NOT MORTGAGE COMPANIES! NOT BANKS! Mortgage brokers have the ability to shop around to several (I mean bunches) of lenders. They will have competitive loan programs available, and you can steer your buyers to them.
Seasoning currently is an issue most often with FHA lenders only. When you start talking to non-FHA lenders, a new doors will open.
Jeff
You look to make a tidy some of money on this deal.
Are you sure about the FMV of $150K? What is the seller's motivation to take o $90K?
I am sure I do not have to ask this, but have you gotten a formal appraisal on this property that backs up the $150 number?
Also, I agree with the Mortage Brokers and not banks. I have used them before on my personall house and refi and it was a match made in heaven. Best rates possible with no points/origination and avg closing costs. (4.5% on a15yr).
Thanks for the replies. The owner has another home, she was left this house and it's just sitting there. The numbers are solid through realtor comps.
Could someone answer my question on either getting a mortgage or equity loan? Would it be costly to get a new mortgage because I'd have to pay closing costs twice then? Once for the new mortgage, and again when I resell...
When dealing with free and clear properties always ask for owner financing. Ask what the owner needs to meet their present needs? You may be able to get the owner to loan you the money for up to a year at no interest. You will never know unless you ask!
Maybe it is just me, but I would never put my home up to secure another loan. Equity loans are dangerous.
I would get a new note under that house and then pay it off when after you rehab and sell. No point in risking your house for this.
Additionally, hopefully this flip will get you some extra cash so you won't need to get familiy involved. That is a whole other can of worms!
BTW - What do you mean by "seasoning". I am not familiar with that term.
How flexible is the seller? How much cash does she NEED and what is she going to use it for. In the event that she needs all $90K, I'd try to have her do a HELOC or a refi for $100K and take that sub. to.
Otherwise just have her carry as much as you can get her to carry at a low interest rate in second position. (say 0% subordinated 2nd)
I'm thinking of offering her 5k cash now and the rest in the form of a note. Would this work? I just give her a note against the house for 85k, and that guarantees her she gets paid once I resell...correct?
Provided that she is that motivated. Sure. The motivation will determine the flexibility.
sounds good make it so
You might not want to promise her anything when it 'sells.' Maybe you can sell via a Realtor (or not) and find a bank-qualified buyer, but you could also advertise it yourself, offer "terms" (with as much down as you can get to cover your costs so far), write up a CD at 8-9% (make sure their payments cover your payments to her) with a bubble that requires a bank refi in two years, at which point you get your big payoff, and she gets hers...unless they flake (you're still holding the deed, don't worry), in which case you repo and do it again, at an appreciated price.