Advice on a unique situation

Jeremy · Joined: 30 Apr 2006 Posts: 2

This requires a little (lot of) explanation so bear with me :)

I am originally from Southern Indiana. I now live in Las Vegas. I do not own a home here, but I'm in a lease option right now on a $500/k home.

My father back in Indiana owns a manufactured home that he rented out. He let my irresponsible little brother live in it for about a year, and he basically destroyed it. My father is currently in Afghanistan (he's in the military), and he just wants the house off of his hands. He's offered to sell it to me for what he owes on it: $20,000.

Last month, I made a trip back to IN and cleaned the house out, ripped-up the carpet, cleaned/mowed the yard, pressure-washed the siding, etc. Then, I had it independantly appraised in it's current state, and it appraised at $53,000.

I want to buy it, put about $10,000 back into it to get it in good shape and rent it. I would also like to get some cash right off the top. How should I do this?

Should I just have my father sell it to me for $50/k, then after it goes through, have him just give me the remaining $30/k?

Or should I approach a lender and ask for a $50/k mortgage on a house that I'm buying for $20/k? Can I even do that?

Thanks in advance for your advice, I could really use someone who knows to help me out.

Jeremy

chow · Posted: Sun Apr 30, 2006 9:45 am Post subject:

There are rehab loans for that purpose where you buy the property for the sales price, and borrow the repair money all in one loan. FHA and Fannie Mae both have them. FHA is owner occ only unless you are a not for profit. I"m not to sure about Fannie's rules. Since the sales price is really 20K, the honest thing to do would be to disclose the real price and your need for 30K to rehab. Questions will arise since it's a relative purchase (non arms length) and almost 100% LTV, and NOO. I would say disclose it. (then the fact that it's a tossabout doesn't help either-I don't know too many investors who do rehab, noo tossabouts. You may need to hit a local bank for it, and it may end up being more of an intallment loan type set up.

Two Indiana based banks I can tell you to call:

First National, Gordie Lucas 317-831-8848
Monroe Bank, Tammy Carter 812-331-3444

Both of these people run the retail arm of the banks mortgage areas and would know if it is possible to do this.

m2c · Joined: 03 Aug 2005 Posts: 937

Even if you were going to live in the property, I don’t think too many brokers would be beating a path to your door for a $20K or $30K mortgage. Just too much cost relative to what a broker can “legally” (i.e., avoiding section 32 and state “predatory” lending laws). Regarding the later, I think Indiana just recently passed a nice whopper.

Nonocccupancy status and the fact it’s a modular home adds additional spins. Overall this is a BANK loan – secondary market offer little solace in this transaction and most efficient source is on the portfolio side.

You might check if the existing mortgage can be assumed AND if he’s willing to let it be assumed. If so and the existing rate is “right”, you could pick up the other $10K through a second and the whole package might be more efficient. Assumability is a far out possibility but it’s worth checking.

Homestyle is the code word for the Fannie product and, yes, it too is limited to owner-occupied properties.

Most important think you should consider – DO YOU WANT AND HAVE THE ABILITY TO BE AN ABENSTEE LANDLORD SEVERAL STATES AWAY? There’s more to being a landlord than simply cash checks. Management contractors can reduce your net and these contractors can vary in quality.

chow · Posted: Sun Apr 30, 2006 1:14 pm Post subject:

Section 32 does not apply to Non Owner Occupied property. That is the only residential loan I could get Uncle Guido to do after the state passed the new laws.

Get this, he was at a church full of AARP members when they were having all of these meetings for the new laws-trying to get them to pass. He asked the room to show hands of how many people even had a mortgage. Not that many people raised their hands. Then he asked how many people owned property free and clear-and about the whole room raised their hands. He asked them why they would want such restrictive laws because if they did take out a SMALL mortgage, no one could do it with the caps on fee's because it wouldn't even cover the closing costs required to close the loans! :roll:

m2c · Joined: 03 Aug 2005 Posts: 937

Touché! I think my old mind is starting to turn to putty.

Jeremy · Joined: 30 Apr 2006 Posts: 2

m2c wrote: You might check if the existing mortgage can be assumed AND if he’s willing to let it be assumed. If so and the existing rate is “right”, you could pick up the other $10K through a second and the whole package might be more efficient. Assumability is a far out possibility but it’s worth checking.

Most important think you should consider – DO YOU WANT AND HAVE THE ABILITY TO BE AN ABENSTEE LANDLORD SEVERAL STATES AWAY? There’s more to being a landlord than simply cash checks. Management contractors can reduce your net and these contractors can vary in quality.

He would be open to assuming the loan, whatever works. I thought about that, but I'd rather just have one loan, of course....which is why I asked about purchasing it at $50 and just have him give me the difference.

Re: Absentee landlord - This is an EXTREMELY small community and I would be renting to someone I've known my whole life. I already have all of that worked out.

chow · Posted: Wed May 03, 2006 1:29 pm Post subject:

If it appraised for 53K why doesn't he just sell it for 30K and be done with it? Depending on where it's at, a lot is worth 20K!