One piece of potential good news… With 700 scores the chance is VERY HIGH that you can go stated income. I will answer the rest first but I’d like to ask a semi personal question BUT do not reply here is you choose to, send it to allied417@bellsouth.net.
QUESTION… Why not buy as personal property.
On to the other issues.
YES the seller would have to carry a 2nd, not matter what the price if you want TRUE 100% financing (price and closing).
Stated income comes in a number of forms.
1 & 2. Stated with no IRS form and without. The form, I forget the number at the moment, when required states that the lender can pull your taxes to verify that you make what you said on the application. There is a risk in this of course. many lenders do not require the form.
No DOC where no income is listed on the application so no ratios are even established.
Lite Doc where bank statements are used. This is beneficial to someone that has good cash flow but their taxable income is low. For self employed lenders used the taxable income so if you have a good accountant and make 100K and run most of it through a bank account but get taxed on 10K you do no want to use your returns.
The addendum to the 2nd is just like an addendum to a contract where you add or remove something. I did a loan where I reduced the terms of a 2nd after the closing by an addendum. It was inititally worth 12K and I cut it to 9.5K and changed the terms (payment, amort., rate). We signed it, notarized it and I added it to my file. No need to record it because notes do not have have to be recorded.
NEXT STEPS:
If you have not looked at the leases and rent rolls for the past 12-24 month you want to, they tell the story.
Find the sellers motivation for selling. If they say they want some cash find out WHAT FOR and figure out how you can solve that challenge. His hott button is your cash flow and lower price.
Make the lower price easy for him to swallow by cruntching the numbers in a 2nd for him with monthly and annual income. If one of the reasons he is selling is he’s tired of managing the units the cash flow from your second may do the trick because he gets to wald away with a big chunk of cash and a small monthly trinkle. In short you have to play to his greed but you need to know that the greed issue is. Drink a cup of coffee or beer with the guy and LISTEN to him talk about the property. if OUT is what he wants all you have to do is oil his lips and open your ears.
Get pre-qualified ASAP. If you send an email directly to me I will send a reply with my site where you can do it all online securely with no cost for the report pulled.
I’m in WA state.
FSBO Duplex, 2bd, 1b each.
Asking: $121,000
FMV: $125,000
Rents for $550 and $600 each = Gross of $1150/mo
Expenses: about $450/mo
Extremely low vacanacy rate (1-2%)
Excellent location
Needs new roof in next couple years.
I can’t owner-occupy it because of other circumstances.
Owner owns the property outright and will consider financing. I have no money down, good credit, but bad personal debt-to-income ratio currently.
How would you put together a “no-money-down” offer on a situation like this? He’s quite motivated (moving, retired).
Re: Ed, et al: Structuring an OFFER on a DUPLEX - Posted by george d.
Posted by george d. on February 08, 2001 at 20:56:52:
Hi Norm,
My first investment was a duplex. My thoughts are:
Remember, duplexes usually don’t appreciate as fast as single family homes.
Even if you could get the seller to do 100% financing at, say 7%, and had no vacancy problems ever, my guess is that after taxes and insurance you might break even at best…and that’s before maint. and misc. expenses.
Please do yourself the favor of reviewing the cash flow on this deal. I can say from experience, it takes a healthy positive cash flow to keep on going in this business when various, inevitable crisis’ arise.
I’m not Ed but I fund deals like this quite often. Part of your solutuion will depend on your credit scores. If they are at or above 660 (middle score) you can get a type of stated income loan (there are 2-4) which does not require you to verify income so ratios are no longer an issue.
Next you get a contract in writing that says what the seller agrees to take for the house. Then you write another at the value you think the unit will appraise for AND have the seller pay closing costs and carry a 2nd. Ther are investor loans that go to 95% with a decent rate. If we approved you for 95% (118.75K) you would need $2250 to satisfy the contract price but the 2nd would be for $6250.00 An addendum to 2nd would be needed to reduce it AFTER the closing to the amount you actually owned the seller. How you and the seller took care of closing costs would have some affect on the adjusted 2nd.
It’s just my opinion but it appears that you are paying top dollar for the unit, based on asking price and value. If the rate were at 10%, you would make no $$. If the rate were at 8% which is not likely, you would make very little money unless you increased the rents after buying or moved someone else in to increase them.
Your opinion is very promising to a beginner like me. I am sure I can talk him down from his asking of $121,000, in order to get better cash flow - AND it seems that rents are a little below market as well, so raising them is definitely a possibility.
I would like to talk more about types of “stated income loans” you mentioned. My credit scores were in the low 700’s last time I checked.
SO, steps to take:
Get a contract signed by the seller saying what he agrees to sell the property for.
Write another contract at the value the unit actually appraises for (actually have it appraised)?
Negotiate how to handle closing costs with seller.
I don’t understand what you meant by having to do an addendum to the 2nd in order to reduce ??? after closing. I’m lost on that part.
It sounds like the “trick” is to get the seller to carry a 2nd. Right? Can you give me some more details how I might do that and what my next steps might be? Thank you very much!
One piece of potential good news… With 700 scores the chance is VERY HIGH that you can go stated income. I will answer the rest first
but I’d like to ask a semi personal question BUT do not reply here is you choose to, send it to allied417@bellsouth.net.
QUESTION… Why not buy as personal property.
On to the other issues.
YES the seller would have to carry a 2nd, not matter what the price if you want TRUE 100% financing (price and closing).
Stated income comes in a number of forms.
1 & 2. Stated with no IRS form and without. The form, I forget the number at the moment, when required states that the lender can pull
your taxes to verify that you make what you said on the application. There is a risk in this of course. many lenders do not require the form.
No DOC where no income is listed on the application so no ratios are even established.
Lite Doc where bank statements are used. This is beneficial to someone that has good cash flow but their taxable income is low. For self
employed lenders used the taxable income so if you have a good accountant and make 100K and run most of it through a bank account but
get taxed on 10K you do no want to use your returns.
The addendum to the 2nd is just like an addendum to a contract where you add or remove something. I did a loan where I reduced the terms
of a 2nd after the closing by an addendum. It was inititally worth 12K and I cut it to 9.5K and changed the terms (payment, amort., rate).
We signed it, notarized it and I added it to my file. No need to record it because notes do not have have to be recorded.
NEXT STEPS:
If you have not looked at the leases and rent rolls for the past 12-24 month you want to, they tell the story.
Find the sellers motivation for selling. If they say they want some cash find out WHAT FOR and figure out how you can solve that
challenge. His hott button is your cash flow and lower price.
Make the lower price easy for him to swallow by cruntching the numbers in a 2nd for him with monthly and annual income. If one of the
reasons he is selling is he’s tired of managing the units the cash flow from your second may do the trick because he gets to wald away with
a big chunk of cash and a small monthly trinkle. In short you have to play to his greed but you need to know that the greed issue is. Drink a
cup of coffee or beer with the guy and LISTEN to him talk about the property. if OUT is what he wants all you have to do is oil his lips and
open your ears.