Financing An Older Building...?
Thanks all of you for clearing up my misconceptions about owner-financing.
Have decided on the one property I want to focus on. Here's the scoop: the building was built in 1914 (yup, it's a classic, for sure). It was converted from a SFR to a 4-plex back in the 1930's. I had planned to put 10% down, get an 80% first mortgage and a 10% HELOC for the second.
The seller is now pointing out that the building's age may pose a problem in getting an 80% LTV loan. So I'm writing today to ask if anyone has had experience with this sort of situation.
The plus's are this:
- Owner has owned it since '79. He's a general contractor, and has done extensive upgrades.
- Put in new framing for the roof back in the '80's. Completely stripped it down, laid new framing, plywood, shingles.
- Completely gutted and upgraded the electrical system, and the plumbing (which is now copper, all the way to the drain at the street).
- Has re-done some (but not all) of the foundation. The four corners of it, and the entire front side of the house, are now bolted.
- Has replaced drywall in entire building as of the 1980's (which should eliminate any fears of lead-based paint).
- I have a 759-credit rating, which should help drastically in getting any loan.
- The income from the property will more than pay the note.
Here's the minus's:
- I'm going stated income (that whole self-employed thing).
- It's my first piece of property to buy.
- I'm being credited $15,000 in escrow from the seller to do termite work, re-stucco the front addition, and to rebuild the back deck (which is currently a safety/liability hazard I don't want to deal with). He's gonna do the work himself, through his company - I've seen their work, and it's good. Not sure if this is a minus, but I'm told lenders look unfavorably upon credits for repairs.
- The building has one additional, un-permitted unit (which was built to code, but the owner kept it unpermitted in order to not push the building into commercial-financing zone). So it's actually a 5-unit building. Will the appraiser count the income from that unit? It IS rented, so I'd think he would just count it as storage rented out for $X/month...
That's about the size of it. Any thoughts? Do you think the appraiser will look favorably upon all the upgrades, and lengthen the useable life of the building because of it?
If they DO want 30% down for this building, do you think I could get a 20-% HELOC and combine it with my 10%-down? Would a bank do that?
Gosh, this financing stuff is a tangled web, when you're first trying to sort through it.
Much thanks,
KC[ Edited by LloydDobbler on Date 03/02/2004 ]
Comments(0)