creative financing suggestions

i’ve finally found myself a good deal. the seller is motivated and looking to get rid of this property because he’s moving. we’ve signed the purchase agreement for 62000. he owes about 50000 on his mortgage. my banker told me mortgages for less than 75000 have a higher interest rate (about 1% higher than normal). with the proposed financing of my banker (100% financed) the payments would not be as low as i’d like (PITI of around 550/month). my main obstacle is to get my payment as low as possible to maximize my cashflow. the best creative financing deal i can come up with would be to take out a bank loan for the amount of his mortgage, and then have him seller finance the rest of it (about 11,600) at 6% for 30 years with a 8 year balloon. this would free up about an additional 60 bucks/month or so. is there anyone out there that sees something better that i’m missing?

You could have taken the property subject to the existing financing with a second owner financed loan for the $12,000. It’s probably too late if you’ve already signed the purchase agreement.

What are the gross rents?


i would prefer to take it subject to existing financing but they bought it as a first time homebuyers and he’s pretty concerned about paying his mortgage off and the bank finding out and all that. gross rents currently (he doesn’t have the tenant in a lease b/c of his mortgage situation) are about 580/month. which cashflows fine for PITI, but it’s a condo and there’s a 180/month association fee, which really zaps it. fair market rent in the area is 675-800. i don’t know whether i should rent out for a rental fee and have tenant responsible for association fee or have all included in one lump sum. i also have a contingency in purchase agreement that tenant must be there at least until june, that way if i close on may 3rd (hopefully) i can catch my breath for a minute and focus on advertising. anything i’m missing or any better way to maximize my gain on this deal? as always, thanks for the input mike and everyone else.

$550 + $180 = $730/mo

This doesn’t sound like a money maker. That doesn’t even include maintenance, vaccancy, etc. You may want to redefine “cash flows fine”.

I think most people will tell you that rent should be 1.25-1.5% of the purchase price. That’s for a home without HOA fees. I’m not sure the trade-off on lower maintenance vs. HOA.