Using My Credit
Not sure if this is the correct forum, but here goes. I was recently approached by an investor to use my credit on a deal she is currently pursuing. My concern is if the deal fall through will I be stuck holding the bag. Does anyone out there having any knowledge about this sort of venture? What type of question should I be asking before considering such a deal? Any help is greatly appreciated.
Thanks
Off the top of my head - I would not let anyone use my credit to buy a house unless 1) I was the only one on title 2) I had an independant appraisal and the house LTV was at 70% or less and the value took into consideration any needed repairs 3) I had an indepedant inspection and the house did not need much more than carpet and paint for repair 4) houses in that neighborhood are good sellers 5) I was making at least 15k profit.
Realize that you are a straw buyer, and straw buyers can and do get stuck holding the bag.
Some shifty people intentionally try to scam straw www.buyer.This is usually when the realtor, mortgage person, and the appraiser are working together. They find a house that needs a lot of repair so it seems to be priced low. They get the seller to raise the price and they fix the appraisal. So say the neighborhood had houses of 200k and this house needs 50k of repair and is priced at 120k. They get the sellers to raise the price to 190k. Outside of the closing statement the sellers refund the 70k. Everyone who was in on the deal splits the 70k. So the straw buyer get maybe 20k for his credit. And they all promise to help the straw buyer fix the place up and sell it. But somehow their help never materializes and the straw buyer is stuck with a 120k house that needs 50k in repair that has a mortgage of 190k.
Others go into the deal with good intentions but they can get in over their head. For example the house needs much more repair they estimated.
Realize that any experienced investor can get a hard money loan and probably end up making more than having to split the profit with you. I would much rather take out a 16% hard money loan and get all the profit than get someone to get a 8% loan and have to split the profit with them.
I have a similar scenario.
I Friend has asked me to use my credit for a construction loan, for a house that he owns out right.
I am very new to this and want to know the correct questions and procedures to go through.
The house would be in my name, along with the construction loan.
I would have control of both the money and the home!
What he would like out of the deal is when I sell the house I take 5-10k and he get the rest.
What do I need to know about this to make a good judgment on wether or not to do the deal?
Thank you in advance
Terence
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