Quick question! How to get cash back to buyer at closing

Financing, Hard Money Lenders, Private Money
1

I recently met an investor that is looking to buy properties from me. He know that I am working on wholesaling and get properties under contract. He is looking for doubles that cash flow. He wants to have me find him sellers that will give him cash back at closing so he can use others peoples money in his deals. He is able to arrange 20 percent down financing at a bank. Here is his email exactly…

I have enough cash to buy the property. I am not looking for owner financing. I want to set-up a 20% down loan for each one of my properties and at the close of escrow I want the seller to pay me as much cash as I can pull out from the equity of the property to do repairs pay the down payment back and to have on reserve for monthly payments. I have the cash, I plan to use opm to create an empire though. Using my cash will evaporate my capital to do these deals, which is why I want to set-up cash back deals.

How do I accomplish this? He is willing to give me money to put down earnest money deposits on properties for him. Do I just get it under contract and assign to him? Also what if the house needs work for the home to be considered livable? He wants it to go like this…

asking price- 20k
repairs- 30k
arv-90k

He wants the close on the deal and receive the 30 to repair and 20k to cash us out.

2

Okay, so this guy is willing to put 20% into the deal and finance the rest. Then he wants the seller to give him cash back at closing to cover his 20% down payment plus pay for repairs and have a reserve for monthly payments. That’s a nice dream but I see two pitfalls. First, what seller is going to do this and second if he is not disclosing this cash back to his lender then he is committing mortgage fraud. my opinion

3

71tr

So how is it possible for investors to get cash back at closing? If the house needs repairs can he buy it from me, go to the bank and get a construction or rehab loan that will cash my position out on the home and give him the money to fix it up without him having to come out of pockets himself?

4

I think he wants you to find a needle in a haystack! Think of all the legwork you’ll have to do find a deal he likes. Will your fee be worth the time you put in? If he’s got the money he should use it. I think the lender will want him to have his own money into the deal. No matter how you slice it, the bank is only going to lend a certain LTV. He wants a seller to be flexible and sell at a steep discount? :shocked :shocked :banghead :banghead :banghead

5

Lenders are watching out for this kind of stuff and labeling it fraud. Better be careful. In most closing packets you will have to sign a document saying this type of ‘cash-back’ transaction is not taking place.

6

It would be mortgage fraud if the lender is not aware of the cashback deal. And in todays market no lender is going to approve a deal like this. Also, if you were able to put a deal like this together why would you need the “investor”? You would be getting your money back right after closing to use over again. What cracks me up is the “I plan to use other peoples money to create an empire”. Sounds like this guy has been watching too many late night infomercials. If you can find deals like the one you posted you can easily find a HML on this board and do the deal yourself.

7

Thanks guys. I am not willing to do anything illegal for anyone to make a couple extra bucks. What would be the proper way for a buyer to get cash at closing to repair a home?

8
  1. Purchase property putting 20% down-payment.
  2. Finance all repairs in some fashion - credit card, private loan, etc.
  3. Locate refinance loan that has short (31-90 days) seasoning requirements.
  4. Appraise property and obtain 80% LTV cash-out refinance - If it appraises for $90K, then refinance could get up to $72K.
  5. Pay off repair financing and down payment money

Pitfalls:

  • possible negative cash-flow due to refinance
  • 2 closings eats away equity

Use with caution – you can easily become overleveraged!

9

You could essentially do three loans (yikes)…OR the easiest way - line of credit to buy and fix then refi. You can get reduced fees from a closing company for repeat business. By far the best way to play the fixer upper game! You need to get yourself to the point where you have access to a decent sized line of credit. That should be your number one priority.

The guy you’re talking with sounds like a complete goober. He’s looking for a quick buck and he won’t last in the real estate business with those “techniques.” Find someone reputable to deal with.

10

I am in the process of getting approved for between 350k and 500k in lines of credit at 9 to 11 percent. I figured I would use this to flip a few properties at a time.