Complex Financing Question; Primary + Rentals
Hello, I need some creative ideas for my situation. I hope I can provide adequate info.
Here is the situation: moving from my primary (keeping as rental) to a new property (new construction; placed 5% deposit summer 04, ready this year). I might need a more money down (depending on financing). I only want to live in this house for 48 months, then sell it. Minus down payment, balance is about 620k (plus $500 hoa fee onto mortgage).
I dont have the income to cover a 30yr fixed (about $4500/mo incl. fee).
I will have 3 rental proerties at that point. Equity as follows a-180k, b-80k, c-80k.
Those 3 properties will only provide about $1500 cash flow monthly. I have a job that generates some money.
Here is my QUESTION:
What is the most creative and smartest way to finance the new primary for only 48 months so that I can sell it tax free. I have been thinking neg amort. loan, using private money investor, short term ARM, int. only, pullling equity to pay mortgage for 48 months...
my FICO will be low 700s approaching settlement.
Thanks in advance!
Cliff,
I am a banker/broker and in my opinion I would do an option arm(neg am) or at the very least an I/O ARM. On the option arm your payments over a 4 year period would be as follows:
Yr 1 - $2051
Yr 2 - $2205
Yr 3 - $2370
Yr 4 - $2548
I would also think about using the option arm on your rentals as well. The start rate would be a little higher, but you would increase your cash flow at the same time. I could tell you what your payments would be on those properties, depending upon your goals with those properties.
It looks like though that you are looking to sell all of the properties and do a 1031 exchange. Which is definitely what I would do into a bigger commerical property that you are cashflowing on.
Let me know if you have any other questions or if I can be of service to you.
Thanks,
Mark
Cliff,
I am a banker/broker and in my opinion I would do an option arm(neg am) or at the very least an I/O ARM. On the option arm your payments over a 4 year period would be as follows:
Yr 1 - $2051
Yr 2 - $2205
Yr 3 - $2370
Yr 4 - $2548
I would also think about using the option arm on your rentals as well. The start rate would be a little higher, but you would increase your cash flow at the same time. I could tell you what your payments would be on those properties, depending upon your goals with those properties.
It looks like though that you are looking to sell all of the properties and do a 1031 exchange. Which is definitely what I would do into a bigger commerical property that you are cashflowing on.
Let me know if you have any other questions or if I can be of service to you.
Thanks,
Mark
Thanks Mark!
I misspoke when I said 48 months. I would say that 36 months would be the MAX, and for tax reasons 24 months would be the minimum.
Would holding for only 24 months change anything? Thanks a lot.
Shizah,
A question , in the above question he said that his monthly rental income is 1500/month, is it enough for
qualifying for the payment of 2000-2300? how much additional income is needed from other sources to qualify for the deal you mentioned. and also what kind of points/closing cost will be required ? Will appreciate if you can explain.
ditto
Cliff,
Holding for 24months will probably not affect anything. Without actually looking at everything in depth I cannot give you a definite answer. Again, typically 24months should be okay.
Thanks,
Mark
Thanks for responding
sounds good!!! look forward to helping out if possible.
Thanks,
mark
Pay option is a good choice for investors, especailly when the house is vacant for a while. other end, the rate is varible and it has been going up, a lot.
http://mortgage-x.com/general/indexes/variability.asp
check out the MTA index and my personal favorite is Worlds COSI.
The property is residential. We are looking to have a credit line of $150000 if possible[ Edited by dharmen50 on Date 03/20/2006 ]
with what you have given, I cannot see any problems with this transaction. Keep in mind this could change depending upon you and your partners actual scenrio.
As stand now though, you would have no problem refinancing to get a lower rate and then also getting the line of credit on the property. It would put only put you guys at 86% LTV based just on the purchase price of the property.
Let me know if you have any other additional questions.
Thanks,
mark
Any Banks I can do this with. Thank You
Not too much higher than what I was just quoted. My first was quoted at 7.25 or 7.5 and the second was 9%. Closing costs on 130 K purchase was about 2-3K plus prepays. This was with 10% down and a FICO of 700+. The other lender quoted me 8.25% on the first and 14% on the second with 5% down. (5-6k closing cost plus prepay)