44.3% LTV Note
Hello,
I am assisting my friend Stacy (no fee) who is buying a property at a huge discount due to the fact that the sellers require a sale by March 3rd, 2009. This note sale will be a simultaneous close at time of property purchase.
The seller has owned and lived in the home for 42 years and it is in great condition. Property Value (Tax Assessed value) is $67,755. Purchase price will be $30,000. (44.3% LTV) Seller is going to lease back at the prevailing rent of $850 and is will stay as long as permitted so this is a N/O/O property. He has a $2450 pension with no monthly debts, only medical bills from the treatment to his wife before she past away last year. Some of the funds from this sale will go towards the payment of this debt.
Stacy (buyer) plans to refinance the property in 12 months after payment history has been established and credit score has slightly improved. She had a Bankruptcy discharged in Dec 2006 and only has $828 of current credit card debt. (Equifax score is currently 624)
Terms of note are $30,000 face value, 30yr amortization @ 15%, with an 18 month balloon payment of $29,913.16. The sellers are prepared to net $27,500 for the note sale.
I calculate a 22.2% annualized yield when the balloon payment is paid off in 18 months, 33.3% if paid off in 12 months. Since this sale has not happened yet these terms are negotiable or a straight note for Stacy could be created to fund this transaction.
This is a legitimate deal with a low LTV requiring a fast close.
Anybody direct me to a lender/buyer for this deal?
Thanks,
James
Sorry for the bad news, but your buyer will not find financing for this deal, especially with a recent BK filing.
I dont want to see you waste your time calling lenders. But, lenders will not consider the sellers income or any lease arrangements. Any discussions of leasing will automatically disqualify her as owner occupied...which is a big deal. In addition, the LTV will be based on appraisal value not property tax.
If you want to do this deal, you will need to figure out a way to gift/give her at least $5000. This will give her a 10% downpayment and cover closing.
It appears to me, that she may not be able to sustain payments on this home, if a renter leaves. Setting up a loan in this case, with $29,000 due in 18 months, should be illegal.
Maybe you can find another local investor, the home price does seem attractive. Good luck