Need Advice ASAP.
Hi there seasoned investors! I am in the process of purchasing two 4 units in Baton Rouge. I wanted to do it 100% financed. The sellar agreed to a certain price ,79,000. The properties should appraisexc for 85,000 ea., so I wrote the contract for 85,000 with the seller giving me 6,000 back for each unit.
The banks are asking me why am I doing this? So what did I do wrong and is there any way to save this deal. My mortgage broker is good and works her tail off but she is new at this and very willing to learn the process. She is a co-buyer with me so there are those added benefits.
What should I have done? And what can I do now?
Needs answers ASAP!
Why are you investing in Baton Rouge,La and you live in California. Baton Rouge is a great college town. Lenders frown on backend deals,besides it might be construed that you are trying to commit fraud. The way to get around this is to get the owner to gift you and your partner each $6,000.00 from the sale at closing to use for remodeling. This will allow you to raise rents.
Quote:
On 2004-02-25 20:33, MichaelChandler wrote:
Why are you investing in Baton Rouge,La and you live in California. Baton Rouge is a great college town. Lenders frown on backend deals,besides it might be construed that you are trying to commit fraud. The way to get around this is to get the owner to gift you and your partner each $6,000.00 from the sale at closing to use for remodeling. This will allow you to raise rents. <IMG SRC="images/forum/smilies/icon_wink.gif">
Essentially I structured the contract to read it that way "owner credits 6,000 for repairs".
I own homes in 4 different states. I live in CA, several reasons why i invest outside my areas.
1) 10,000 buyers to one property
2) hyper- inflated price
3) banks expect min 30% with 700 and above credit
4) buyers make unbeleievable demands because of this climate, eg. "close in 15 days of keep 10,000 earnest money.. [like are they kidding this is not vegas betting!]
6) I would hire a property manager anyway as I work a full time 10 hr day job.
7) even if you invested 30% on a 1.5 mil 4 unit in W LA there is no way to cash flow as there are rent controls.
So the idea you have to buy around the corner is so backwatered.
Besides I get an excuse to visit these areas and write it off and another excuse to get my pilot's license to fly to them
But in a nutshell it lets others invest in areas that have property with high cash flow below market. I do inspections on the property and always include a warranty on them.