Ethics

I have just been pre-qualified for a 5/1 ARM loan to purchase a 250k house. It currently has a tenant in it paying 1900 a month. The tenant has agreed to a 3yr L/O at 1900 a month. Now when I first asked this question of the board I was going off a appraisal from Dec. 2005. I had the house appraised again and it is actually worth 315K. Now with the loan that I will get my actual payment will supposedly be about 1000 a month. Now 2 questions, Should I mortgage the house for the full value and should I lower the T/B monthly payment to bring it closer to the actual payment?

Benjie

Will the lender require you to pay MIP if you mortgage at 100%?

What is the cost of that?

What does “Ethics” have to do with it? Are you mortgaging as an OO property?

Keith

The ethics question is if my payment is much lower than what the tenant is currently paying is it unethical to not tell them. I know we are here to make money but we are hear to do it honestly not as some rip off. I will have to check into the MIP question.

Benjie

You have a contract with a tenant (Lease) wherein they agreed to pay $XXXX a month (in this case $1,900) with an option to purchase within the three year period for an amount or a formula for an amount…

When they took out the lease, did you tell them what your payment was? It’s not really their business…some of my proeprties I owned outright, some were 80% leveraged, etc.

You don’t owe tenants that sort of information…

My two cents…

Keith

Thank you Keith for that answer. The rest of the deal cash flows so it looks like my first deal is going to be a winner. I want to thank everyone on the board for their question and answers.

Benjie