Hey all. Hi and sorry i have been a stranger! I just ran into an opportunity to buy a property under market value. I know the home owner so know the home. backstory, she owes $38k on a home that is appraising for about $160k. She Needs an additional $30k after payoff. I am considering borrowing about $70k to pay off the mortgage so she can get the title, then do a sale by owner and owner finance the rest. (No interest) My plan would be to move into this one. i have about $130k equity in my rental. Options i am mulling over, are refi the home i have, and rent should cover the $70k. Then i would have tiny interest free payments on primary residence. Or leave that mortgage alone, and seek financing for the $70k or so, against the property i am looking to buy. This would take on more debt from my revolving income, but keep equity in my property which has a 3.25% fixed. It also is gaining more principle than interest each month right now. This option would create another monthly bill to a bank, plus i would be paying additional to the owner each month. Stretching me more thin, but maintaining equity in the more valuable property. What are the real estate tycoons’ thoughts. Id be happy to pm anyone with real knowledge and input, if more details are requested for a real evaluation. or im open to other options. I dont have a lot liquid though. But those are the two i have come up with on my own…
I am also worried about buying a bubble, but if the deal works out, it has a good buffer and half interest free….
I guess another option would be to just assume her mortgage, and pay her a difference each month, for set amount until sale price is paid off? She is family and has made clear all she wants out of it. Terms are flexible as long as she has security. I wouldn't f her over, but it would help both of us, ultimately. not sure how we go about legally protecting both parties at that point. Im sure there are terms and contract ideas we could come up with. My original plan would have her holding the title until i met my end. With contracts, of course. In this case, the bank still would until paid off and it would still be under her name….and that could get hairy if unexpected things happen.
Probably make that my primary residence. Its less house than the property i am renting out. Which is fine for me. and payments would be much less. and would be less expensive. Either way, adding a property to my portfolio, is the goal. I could easily rent this one too, and move back into the one i am currently renting out….but its all fluid as to how cheap i could get my own monthly payments on it.
I'm no tycoon but I will share some thoughts. R-E can be excellent or it can horrible, with much of the result coming down to skill. In your case, you have tremendous skill with trades and construction knowledge so that factor will go away. Generally, R-E is considered a good investment because it has a standardized leverage mechanism. Younger R-E investors advocate for maximum leverage. I do not but I believe I am in the minority. So, if you know it to be a good house and you have a chance to obtain it, more debt is probably better than less. R-E leverage also tends to pivot on how many years you plan to own the house. IMO, inflation is going to be a huge wind at your back. The house is extremely affordable so you obviously don't live in a major city. Major city prices tend to flow from major cities to small cities, over time. Growing up in Canada, my city had about a 20 year lag behind Toronto and Vancouver. It still does. Financing is going to come down to what fits best into your situation. You're the expert on that. Whatever happens, it is a pleasure to read about a really good man doing well. Best wishes to you.
Thanks for your valued input as always. As it stands, im looking at a property not appraised yet, but zillow and realtor have for around $170,000. Early talks are that i will assume mortgage (it possible) at $500 per month for im guessing 12 more yrs by payoff. She doesnt know maturity date, but bought in 04 and is halfway there. So im guessing it was a 30 yr loan. And pay her a few hundred a month supplementary income. Maybe $300 or $400. To be raised once mortgage is paid off, or end of life. She is late in her yrs and is more than likely about to go to SSI. She isnt worried about getting the appraised price, as we both know there is a roof and siding problems. And the house will stay in the family. It needs some tlc. We are discussing somewhere around $100k or so total. But aside from the $38k owed, the financing would be interest free. And the loan is old enough that most of the payments are going to equity now. So i dont want to change that! My first property has been a blessing still. Great tenants, positive cash each month. Great location where i can even raise the rent, if they decide to move out. Im happy leaving that rented, and downsizing for myself.
Whatever you do....hire a real estate attorney to educate yourself on the various "legal" ways this deal could be done and to make sure everything is done properly and recorded properly.....especially on a "family" deal. One of my siblings holds the mortgages on both my kids houses. Everything was done and recorded.......by the book........for everyone's protection. Because these were "family" mortgages....there was no appraisal and the term of the loans is......over......30 years to make the payments more affordable.
100% wxyz! Im looking into subject to’s as well. And i do understand family deals can get hairy. We will 100% go the legal route! Ive since found her paperwork. It is a variable loan right now. Which i hate. That said, as long as interest rates hold, its golden. If not, the payoff is less than a mid class new vehicle. About $37k. If i saw interest go stoopid between now and payoff, i could overpay, or get creative to payoff. Or just cram some OT… honestly, both properties are over the interest to principle curve by quite a long shot. So im very disinterested in changing either loan. Id love to have my personal dwelling paid off, sooner than later. I could refi a rental all day, but only to add another rental to the ol folio, but not my. personal house. I dont like the sound of that kind of leverage.
