Advise Needed
I found FSBO property on an excellent location. She bought the house for her daugher and he daughter is graduated now. Asking price: $168K. I think that is FMV. Mortgage balance $109K. Mortgage begin in Year 2000, ARM. The house build in 1986. She said I can assume the mortgage if I can.
Question: What is the best approach on this case?
ew86
Do you want to qualify for the loan? If you assume it you must! And can you qualify? Is it the best loan you can get?
Perhaps buy it on a wrap with seller financing, A lease option, contract for deed? What are you doing to cover the present equity she has?
What do you want to do?
Find a motivated seller where you can purchase at a discount and not qualify for a loan. and come out of pocket with a lot of money.
ew86,
The loan is very likely not assumable, without qualifying, as the others that have responded have stated. Are you trying to get this as an investment or to live in?
Hi All,
Thanks for the quick responses. First of all, I am an experience new houses SF investor, but I have no experience on creative financing. I don't know what qualifying means? What are the requirements? The last time, I checked my credit score was good, but I may not pass the debt/income ratio.
I don't think this is assumable loan b/c she bought the house in 2000. She is out of town now so I am hoping I can offer convinient for her and ask for discount. The house is in prime condition.
I don't know if that's much of benefits to take over the loan since it is ARM. The only benefits are no closing cost and I have 25 yrs left instead of 30 yrs.
As far as what I want to do with it, I lean toward to rent it out, but I am open with anything. I need a good cash or positive cash flow. I bought a few properties 15yrs fixed term with negative cash flow (did not know any better back then), but I don't want to refinance them b/c the rates are good. Thanks for all the input.
As far as what to do with equity, I was thinking to take second loan and give it to her.
Hi again ew86;
This don't sound like much of a deal at all in your favor. But then neither do the negative cash flow properties you said you have, unless you have sufficient income to write it off.
Sounds like your more a retail buyer, than investor, and you can do that all day everyday. Unless you enjoy the negative cash flow, and management of your properties sell them and carry the financing,,, or unload your negative cash flows.
Qualify for a loan is what you seem to have been doing in your prior investing/purchasing, I suggest you find some good sources of information, (several good ones are indicated on this site, at times) I also think there are a couple (at least 1) good REI clubs in your area.
I have a daughter in the Phoenix area who too believes buying at full retail and waiting for appreciation to make her wealthy. She scrapes and struggles to save to buy, and last I was aware she had 2 (alligators) properties with negative cash flows. She will eventually learn I am sure.
[ Edited by ozzie on Date 05/01/2004 ]
Hi Ozzie,
I agree that if I let her takes most of the equity the pay for FMV then it's not a deal. I have not negotiate anything yet at this time. I am looking for idea to create win/win situation.
As far as my other properties, I did make profits. But as not as much as creative financing. I travel extensively for my full time job. Rather than waiting for a good deal, I bought properties on good area which I am glad I did because they have appreciated and somebody paid for my mortgage. I did not have to negotiate, research, etc on those houses. The negative cash flow happens b/c they are 15 yrs term. Finding a good deal is time consuming and time is money.
[ Edited by ew86 on Date 05/01/2004 ][ Edited by ew86 on Date 05/01/2004 ]
If you will be paying the asking price, or close to it, I believe that you'll have a dificult time having it positive cash flow as a rental in Phoenix unless it's downtown. 3-4 br 2 b (assuming thats what this is) will probably bring in $1100 - $1200 tops in rent. here.
If you assume the loan, you will have to qualify, by bringing your credentials to the lender for review. The lender will want to verify your income, credit scores etc. and make a judgment about your ability to meet the financial obligations of the loan, and sign new paperwork with them officially making the loan yours.
How much cash will she require now to be on her way? Will she finance most of her equity with VERY good terms? For how long? Instead of assuming her loan, could you take the property subject 2 the existing financing? (Leaving the existing financing in place, not qualifying, and simply make the payments)
I can understand and appreciate your position, and did not mean to be critical, I too have paid full retail for properties because I either did not know better, or was foolish enough to fall in love with the property.
I do not any more, It is good that financially you are able to handle the negative cash flow, and it well might have been beneficial for you tax wise to do so. My daughter and her husband can afford some negative too I am sure, but in my opinion there are better places for it. Unless by having it it is financially beneficial tax wise.
Good luck