Need Some Creative Financing Ideas!
Hello All,
I have come across an estate home and am trying to think of creative way to finance the deal and could use some help. Here is the what the deal lloks like:
ARV 195-200K
Rehab 25K maor updating throughout home
Profit 20K
I figure we can offer them around 125-130K right around that 60% LTV. I am fairly positive these people will basically laugh in my face. The estate has a good amount of debt and therefore I dont think they can carry back a note. Any othere creative ideas that anyone may have. What is the best way to approach this to make all partied happy. Any thoughts would be appreciated.
Thanks in Advance,
Jay 
I'm currently closing on a similar deal - an estate property that needs updating - and here's what I did. First, the numbers:
As-is Value: $99,000
Value After Updating: $130,000
Repairs: $15,000
Purchase Price: $74,000
Because this is an estate, the seller agreed to sell for $74,000 and pay all the closing costs and fees.
Now for the "creative" part:
In Michigan, we can do what is known as a "hidden second mortgage." I don't know about your State.
Because the current value is $99,000, we can legally say that I'm buying it for that price. I go to the bank and get a loan 80% LTV ($79,000), which is $5000 over what I'm actually paying for the property (I pocket this money at the close). The seller agrees to take back a 2nd mortgage on the balance of $25,000...however, this is ficticious and only paper... I don't actually pay the seller and he can't hold me to it. It's only done to satisfy the lender, although it's the lender who is structuring this deal (weird huh?)
RESULTS: I get cash at closing, instant equity, and a better deal from the lender for only borrowning 80% LTV.
The key to getting it for a lower price was justifying my offer with repair estimates from contractors (but only for the big stuff). That way, they know I'm not just pulling some number out of the air. This works for me nearly everytime because seller's can't dispute the "facts" about repair costs.
Hope that helps.
The only thing I have been able to do is to get Hard Money loans for 70% of the ARV value which usually includes enough money to be escrowed to fix up the property. Really not very creative but I am able to get almost 100% financing on super deals
Good LUCK and Thank You
Hope this helps some
Ted Jr
kimander,
Tedjr brings up a good point - when you try and take out a conventional loan on the house, the bank (and more importantly, the appraiser) are going to look at the purchase price in determining the value and, subsequently, the number upon which your LTV is calculated.
There are banks that offer loans without using this figure but they are difficult to find unless you have had the house for 6-12 months.
Molotov
One suggestion is to not get a bank loan, there is too much red tape involved.
One of the biggest loans in 2004 is the REHAB loan. It allows you to work off of the appraised value after repairs and based on what you qualify for, is between 65% and 90%.
Lori
[addsig]