Good Evening everyone,
I’m getting ready to put together a contract for a seller/HML deal and needed a bit of assistance from everyone on the numbers. Here’s the situation:
2-Unit home (fully occupied)-currently under property management
Gross rents: 1150
Purpose: Buy & Hold
Note: Comps show similar area homes at 60k
Now, my partner and I are receiving seller financing on the property:
Sales price: 50k
Downpayment: 10k (given from a HML)
Seller finances: 40k @ 9% interest only for 2 years ($300 per month approx) w/ the option to hold for 2 more years @ a 10% premium ($334 per month).
Taxes/Ins/Water/etc: $350 per month
Here’s the problem: Our HML wants his 10k within 6 months (no payments until 6 months with 10k+7% due at that time). Seems like we have two options, refi before the 6 months and pay off the seller financing and our HML OR pay the 10k out of pocket which I would like to avoid.
My question is: Are there currently any lenders that will refi a property like this with no mortgage on it within 6 months? If so who? The property will be in an LLC name.
Appreciate the help and PLEASE be blunt, definetly looking for honest opinions/responses.
Thanks everyone!
Thoward,
You have a classic "no money down" deal, congratulations.
To buy the property right now you need to have both parties recorded as note holders becoming TD holders. (1st and 2nd)
This gives you a seasoned and eligible property to refinance in 6 months.
Value $60k
Re-finance $48k in 6 months. 80% LTV
It looks like the property is positive the first 6 months by $500 per month, bank this money to use towards refinancing and closing cost’s in 6 months.
It looks like this property is making enough cash flow to get a new fully amortized mortgage for 10 years @ 7.5% for $48k = $570 month.
An amortized mortgage is a much better deal for you guys, your tenants are paying off your mortgage and you guys get the tax write off’s.
You may have to throw in a few dollars to close this in 6 months, but nothing like the whole down payment.
GR
Thoward,
As long as there are current notes in place you should have no trouble refinancing. You will need to provide copies of the notes at the time of refinance to prove that you are currently obligated on the property, but other than that you should not have any issues.
As long as both notes are recorded as purchase money then you’ll be fine. The only problem I could forsee is which one will take first position. Usually HML will not take 2nd and the seller probably wont either since they are loaning the majority.
Thanks for the replies everyone,
My apologies for not getting back earlier but the seller has been a pretty big pain in getting this deal done. Can’t complain though as I seem to find the best deals usually come with the most difficult people.
In relation to your comments, the HML is agreeing to this without placing any lien on the title. He’s actually lending the money as if its a personal loan with no doc’s except for a personal contract between my partner and I and him (I think he’s new to this but he laid out the terms so…). The property won’t be listed as collateral.
As far as piggybacking on the seller to get the financing…no dice. He’s an attorney out of NYC from what I understand and wants out, no strings, no title, no responsibility (except for collecting our money). I would assume he’ll record some form of lien on the prop but I’m not totally sure. With that being said it leaves us in sole title, under the LLC’s name of course.
I’ve spoken with a couple brokers who’ve told me that there’s two years worth of seasoning requirements to refi investment property. As the property’s been under management for the past two years and has had positive cash flow each year (the same tenants) have you heard of any tenants using the rent rolls as sole verification of the cash flow for a refi. I have the ability to pay my HML out of pocket in 6 months but i would REALLY like to keep this textbook and spend no $$ out of pocket. Worse case scenario, I dip into my “Ferrari Fund” and pay him off though. Any idea’s or suggestions?
Thanks again for the help!