Good question, I did leave out the details on the balloon note. The payment was due in September, but the association allowed me to continue making the monthly payments while my existing renter was trying to get financing. I’m in pretty good with the association as the unit is kept up well and I pay on time, which seems to be out of the ordinary. However, they have now set a Feb. 15th deadline for the balloon payment to be made as they would like to use the money for various community improvements.
So far I’ve dabbled in REI when I could. Right now I have a rental that was my first starter home. I kept it after purchasing a bigger home 3 years ago. It has a positive cash flow and I’ve got about 20K equity in it at this point. I now have an opportunity to get another rental without incurring many transaction costs.
My mother purchased a 2-bed/2-bath condo in a small community about 3 years ago (near KC, MO). She rehabbed it using about 9K. It was a total wreck when she bought it. The homes association handled her mortgage, as it would have been hard to get financing in the shape that it was in. However, the note required her to find other financing within two years.
For health reasons she moved to a Southern state and I have been managing the condo for the last year. I rented it as a lease/purchase in March, but the single mom cannot get financing. The value of the condo is around 40K and the balloon payoff amount is 26K. I have a great renter ($400/mo) that would like to stay (the mom) so I’m going to purchase the condo from my mother so she can get some of her equity out and I’ll keep it for a rental. I have Power of Attorney (POA) and can pay cash if necessary but for tax reasons would like to get a 15yr loan for around 30K.
Shouldn’t be a problem. However, the condo is in a very tight knit community where there are virtually zero comps because the homes association has always financed them in the past. The only true “value” that I can get is based on the rent I can charge and the appraised tax value (38K).
So, here are my questions:
If I do go after a conventional mortgage, is there a well-known, national appraisal company that I should use.
Do I even need to “buy” the property? Is there some easier way to transfer ownership with incurring all of the expenses of closing, etc. since I have POA for my mother?
What is the best route for finding financing on such a small loan (32K). It is so small I would imagine most lenders wouldn?t want to bother with it.
Re: Financing a special condo deal - Posted by Ed Garcia
Posted by Ed Garcia on December 31, 2000 at 09:28:50:
Tom,
Here is my opinion on your questions:
If I do go after a conventional mortgage, is there a well-known, national appraisal company that I should use.
The Answer is, only if you are going to use a National lender. Most lenders prefer to choose their own appraisers. By the way, the condo association financing the condos in the building, have nothing to do with comps. Comps are based on recorded sales. You can go down to the county recorder to pull comp as well as the MLS. An appraiser in Missouri should know that. If there is a problem pulling up comps in the immediate building, they can use another complex in the area.
Do I even need to “buy” the property? Is there some easier way to transfer ownership with incurring all of the expenses of closing, etc. since I have POA for my mother?
According to you, in another post you made to Nate, the loan on the condo is coming due on Feb 15th. So I would say that if you want to keep the condo, you’re going to have to refinance it.
What is the best route for finding financing on such a small loan (32K). It is so small I would imagine most lenders wouldn’t want to bother with it.
Tom, you’re right. Because of the size of the loan, this deal is not exactly a lenders dream. You mention how when your mother purchased the condo, it was in terrible condition. You mention how you pay the condo association on time, when others don’t. This building sounds like it’s had its share of problems. My suggestion is to go to a local small bank. They make loans in the community, and should be able to accommodate you. I wouldn’t rule out a mortgage co. either. It appears to me, that if you want to keep this condo, the answer is obvious. You mention that you have cash to pay it off but you don’t want to tie it up. So why don’t you just go to the bank, and put down 20%? That’s only $6000, the moneys going to your mom anyway. She put $9,000 in the deal to begin with. For sure I would try to see if I could get the condo association to discount the note.
Tom I want to wish you and your family a Happy New Year,
I am a little unclear on one detail. You stated that your mom bought the condo 3 years ago on a note that had a 2 year balloon.
This would lead me to believe that she has already refinanced the original loan from the condo association – but you don’t say that anywhere.
If that has happened, why not simply have your mom sell to you subject to the existing mortgage, and you can turn around and sell on a land contract, but for a higher price, to your tenant. Or you could keep renting it out for a positive cash flow. No need for you to get a loan at all.
If not, I’m not clear on how you could still be making payments after 3 years on a 2-year balloon. Wouldn’t the loan have been called due already??
Also – just because the homeowners association has done the financing doesn’t mean no SALES have taken place. An appraisal generally looks for sales comps – and other condos that have sold, whether or not financed by the condo association, would be considered relevant.
Also, I guess the reason there aren’t any comps is because traditional RE agents aren’t typically involved. The community has its own newsletter and nearly all deals are done through the association. I think comps are based mostly on MLS transactions. Right?
I know that the bankers that my renter was working with mentioned the comps problem continually.