Creative Financing and such

I’m wanting to use some of the financing techniques used by investors to purchase a primary residence. The situation is I have poor credit and only have part time income, right now. But, I have 3 working adult relatives who I live and share rent with and have for a long time. We’d like to purchase a property for our joint use. Perhaps, where I own the property and lease to them. Our combined income is a little over 2800 a month. Is there some sort of technique that would work for this arrangement?

Is there noone that could give me any input on this scenario? Perhaps you could direct me towards another resource or site that would detail a purchase like this?

You need to be looking for owner financing. Poor credit and part time income = no conventional loan. Start looking around for bandit signs on the side of the road that offer owner financing and give them a call.

Thank you for the response. Do you have any advice or direction for actually presenting or negotiating this to a seller? I’m aware that conventional financing isn’t an option. I was looking towards using other methods. I’m not a real estate investor, though. So, I don’t really know the ins and outs of arranging a purchase like this.

From what you say I wouldn’t sell you a seller financed home until you have a full time job. Not trying to be rude but hey.herbster

I am not too familiar with Lease Options so I dont know if that would work, and I do agree about owner financing being tough to get with no full time W2 to show.

Make your roommates partners and split the mortgage somehow, but then you also split the profit when you sell it, you have to start somewhere.

Thanks for the additional input. I understand it would be a hurdle for me alone try to purchase a house. But, I thought their could be a means to do so using our pooled resources. Brian, we are planning on sharing the mortgage. We won’t be selling. We’re looking for a primary residence for the four of us that we can rehab/modify into a dwelling with 4 master suites/apartments in it. We have and will be living together long term. What we’re aiming at, I think, is a joint tenancy or tenancy in common situation.

Is their a way to have multiple people purchase a house, without it being a business?

Another question…

To offer the seller a little extra security, would it be a good idea to set up automatic payments to the seller deducted from my paycheck or checking account?

Escrow account? Or a separate account that he deducts from?

There is also property maintenance and insurance and taxes that have to be deducted from somewhere, maybe that can be from that account also.

can any of your roommates qualify for a loan? As long as everyone will be occupying the property it should not be a big deal

2 of the roomates have no real credit history. They lived with us other 2 since their mid teens. Since we started out paying the bills, we just continued to with the others just chipping in financially when they came of age. Their in their mid 20s now. The other individual besides me has poor credit, as well, but very stable income. We’re looking to stay together. But, create a more suitable living space to accommodate us.

Brian, I looked up the definition for an escrow account. It appears something I’d be willing to agree to. Would there be a big difference/advantage in using this over just a regular account?

Again, I’m not a real estate investor or professional. So, I don’t completely understand some of the terms I’m coming across. Is a land contract and a purchase money mortgage the same thing?

Thanks, for answering my questions guys.

Land contract just means that you have a contract to buy the deed for the property. Here is what you need to do.

  1. Save for your down payment. You are not going to get 100% financing for this deal. You will probably need 5-10% to put down.
  2. Get out the newspaper and look in the real estate section for properties advertised as “owner-financed”
  3. Contact the owner and explain your situation. They will decide what they will accept as far as income and asset information for you and any or all of your roommates. It sounds like your roommate with the stable income needs to be the primary resident and lead borrower for a transaction like this.
  4. Negotiate a price and and sign the documents.

Using owner financing is very simple. Here in Dallas there are a ton of investors marketing owner-financing.

Also, you will most likely be required to carry an escrow account, as the owner will want to be sure that taxes and insurance get paid.

Thanks, Christopher. That’s what I needed to know. We’ll be able to come up with the down payment in a few months. I’ll keep a watch for properties offering owner financing. See if the seller’s willing to work with our situation. Thanks for everyone’s help.

Here’s something you need to think about. You have 4 adults and your COMBINED income is a little over $2800/month? Minimum wage @ 40 hrs/wk should be around $200 - 220 gross/wk. The four of you aren’t even making minimum wage. Where is the rehab money coming from? What if the income from one or more of the adults disappears (for whatever reason)? How are you gonna pay your mortgage? The answer is you WON’T. You’ll end up losing the house. I think you’d be better off working on your income and credit repair. If you spend 2 years working your butt off to get a better income,save money, pay your debts and acquire “good” credit, you’ll be in a better position to handle the payments yourself and then you can lease to the others. For now, maybe you can rent a 4bedroom house/apt. to serve your housing needs. Then work on a home purchase when you’re bettter able to do it. Good luck.

Thanks for input phlemboy. We don’t plan on buying a house and ripping it apart right away. The improvements are expected to made in small increments over the course of several years. Neither, are we going to go out there and buy more house than we can afford. We’re keeping it under 120,000. We’ve been renting together for years. It’s an arrangement we find very beneficial and haven’t encountered any trouble in being able to pay rent or routine household expenses. In renting, we’re paying the same or more as we would if we were buying a house. Only, to get imperfect living quarters that don’t match our needs. Single family homes cater more to mom and dad with kids, not four adults looking for combined but clearly defined living space. Looking at it from the standpoint of renting for another 2 years or buying a small fixer upper,now, and adapting it. I think we’d get closer to what we want and have more to show for it by purchasing rather than renting

It sounds like you would all be happiest with a 4-plex. This building would still fall under residential loan requirements (5 or more is commercial with different guidlines) and you would each have your own place in the building. There are normally a fair amount of these smaller multi-family units in any given area. Some need updating and can be bought for around the same price as a fairly nice single family home. The building would already be suited for your preferred living arrangement vs. trying to find a house with 4bd/4ba.

Thanks, justin. A 4 plex could work. But, multifamilies in my local area tend to be duplexes. I haven’t seen any go above that with the exception of large apartment buildings. In any case, there are elements of a house we don’t mind sharing. The kitchen, for instance, is not something that each of us would need our own of. We’re mostly concerned with creating 4 master suite bedrooms. The kid sized rooms just aren’t working for us and our respective stuff. The nonessentials can be compromised.