Ed Garcia! Question! - Posted by Phil Pelletier

Posted by J. V. G on September 30, 2003 at 24:28:29:

I am not a lawyer, but one thing that you may not also realize, when you do a purchase and lease back to the original owner, you may be risking violation of state lending and usury laws. Refer to Bill Bronchicks articles on this.

Ed Garcia! Question! - Posted by Phil Pelletier

Posted by Phil Pelletier on September 24, 2003 at 02:52:26:

I am trying to help a friend out who is gacing foreclosure. He is willing to Quit Claim Deed me his house after I purchase the first mortgage on his home at a discount. He now owes $61,000 on a conservatively valued $80,000 home. He also has a $10,000 second mortgage that he will be paying off at a 75% discount tomorrow. Except for the first mortgage, the home has no other liens. The investor who now has the first mortgage will sell me the note for between $21,000 (my first offer) and $50,000, their verbal “pie in the sky, you’ll never pay this, will you?” counter offer. I figure they will settle for around $35,000. My friend will have $9500 in cash after he pays off his second mortgage tomorrow. He will send it to me as a lease option payment.

My question for you is this: If my friend Quit Claim Deed’s me his home, can I buy the note from the first position investor using conventional financing? Or do I need Hard Money, then refinance into conventional?

My friend will pay me $550/month rent while he reestablishes his credit and applies for a loan to buy the home back from me at $45,000.

I figure there is about $20,000 to be made here, plus about $200/month in positive cashflow. Can I use conventional financing to secure the note if the home is deeded to me?

Phil Pelletier

Any Loan Brokers in Pittsburgh that can chime in here, feel free to contact me at the above number. Foreclosure sale is October 6th. Gotta MOVE!

Re: Ed Garcia! Question! - Posted by Lyal

Posted by Lyal on September 24, 2003 at 10:26:20:

I’m certainly not Ed but…
Deals with friends and family are fraught with problems. If your friend can’t pay the mortgage now, what makes you think he’ll pay it later?
As I read the numbers, you’ll have 35k plus closing costs, insurance, etc into the deal (1K or so) less the 9500. He’ll buy it back for 45k with credit for the 9500 he’ll still owe you 35,500. I’m the first to admit my math skills stink but I don’t see the 20K here.
At any rate, your process is out of order. Before you put ONE DOLLAR into this, get the quit claim (into a trust). You need to control the property before you start putting money into it. You also need a title opinion. Do NOT take his word that there are no other liens.
As far as financing, have you tried the small banks for a commercial mortgage? They have a little more “wiggle room” for investment properties but most likely they will want to see some of your money in the deal.
All the best, Lyal