could someone expand on this GARCIA post... - Posted by BILLY BOB

Posted by B Dixon on April 10, 2002 at 09:03:28:

Find a “good” broker who deals with investors. They can easily structure this deal. For example if you did a 80% no/low doc loan, that’s 200k. A good broker/lender will understand what you’re doing by having the seller hold paper. As long as they get 1st position they don’t care.

could someone expand on this GARCIA post… - Posted by BILLY BOB

Posted by BILLY BOB on April 09, 2002 at 12:34:38:

this is the quote from ED:
‘You could ask the seller to sell the property to you cheaper and adjust the seller carry-back accordingly. I haven’t discussed this much, but there are legal ways the seller can kick back some of the sales price to you.’

here is the link to the quote. unfortunatley, others asked for clarification as well but ED did not respond back. ED if your out there, or others out there that KNOW, all ideas would be appreciated.

as it would be, i have found a deal that could benefit from knowing some/this additional info. TIA for any advice or input.

i have made an offer to a retiring LL for 2 duplexes. market value is ~125k per. each will appraise for more. all are rented in a great neighborhood in a growing community with long term tenants all paying 50-100 below average market rents and are aware that an increase is looming. appreciation has been 5-10% per year for last ten at least. i offered a cash price of 220k for both duplexes. the seller thought was a bit too low. so i countered with 240k. 190k new loan to cash him out (LL has minimal mort left) and he carry a 50k note with no payments/no interest with a 2 year balloon. he is interested now (accepted, contingent on fin/inspect). i am comfortable with the numbers the deal produces, what concerns me is structuring the deal and getting it through. my first question is: can i get these 2 duplexes under 1 loan? would it be commercial? would that be better or would there be benefits to getting 2 seperate homeowner loans? what are the tax implications to the seller for the carry back? bottom line how would the pros structure this deal.

2 duplexes
appraised value 260-275k
240k sales price
50k carry back
i need 190k to seller
rents 2400; 600 per with long term tenants in place with no immediate expenses due
excellent credit
would like to put no money in deal up front but could do 5-10%

exit strategy is enjoy the good cash flow for 2 years (put into other investments) and refi one or both props at balloon time to pay off seller carry. and yes i know rates will probably be higher in 2 years so i may not wait that long. but these will be long-term rentals.

all suggestions wanted!!


Re: could someone expand on this GARCIA post… - Posted by Ed Garcia

Posted by Ed Garcia on April 10, 2002 at 10:07:22:

Billy Bob,

To answer the first part of you question as to what did I mean when I stated “I haven’t discussed this much, but there are legal ways the seller can kick back some of the sales price to you.”’

Billy Bob, what I was referring to, depending upon the deal, is that a seller can kick back or credit for repair, or replacement of carpet, new roof etc. Which can be perfectly legal if disclosed. So in the event you wanted curtain work or repairs done to the property and you wanted the seller to pay for it. As long as you’re buying below market, you could have the seller increase the price and charge it to the deal.

Now in the event you and the seller agreed on the repair or replacement cost and you could repair the property cheaper then originally coasted out, then of course you could keep the difference.

Billy Bob, You seem happy with your new acquisition, so I’m not going to comment on it, other then to say, that I would not cross collateralize the two properties.

I would put two individual loans on this deal, so that it will give me flexibility in the event I want to re-finance or sell either one of them.

Ed Garcia

Re: could someone expand on this GARCIA post… - Posted by B Dixon

Posted by B Dixon on April 09, 2002 at 15:05:06:

The numbers look ok, speak with your lender or a good broker about the best way to proceed. I’m sure you could get 190 on a no/low doc loan.

Re: could someone expand on this GARCIA post… - Posted by Billy Bob

Posted by Billy Bob on April 10, 2002 at 11:50:30:

yes i am satisfied that i think this deal is good for me. however, i have made many bad/questionable decisions and i’m sure i will make many more in my life, not just in rei. i would be a fool if i was to not be interested in someone elses opinion of this deal. especially from those that have been around the block a few times. please, dont hold back. let me have everyone. tia

Re: could someone expand on this GARCIA post… - Posted by bb

Posted by bb on April 09, 2002 at 15:37:24:

i know getting 190k on the props would be little trouble. i am trying to do this legit and not commit loan fraud however small the details may be. how would i structure this so that a BANK would give 190k KNOWING the seller is carrying 50K as well? would they do an OO/blanket(?) loan on both props even if i lived in one side of one duplex? i know i can swing the financing if i leave out a few details with the lender. this just isnt me though. i was looking for a better suggestion than to call a lender/broker. most are CLUELESS as to how to legally structure anything other than conventionals. i was looking for a bit more specifics. thanks for your attempt though.