Help on 1st rental financing deal - Posted by Shawn Wright
Posted by Shawn Wright on February 16, 2001 at 20:58:19:
I’ve read Robert Allen’s Nothing Down. I’m ready to start looking for good revenue properties, but I have no cash to put down.
I do have: 25% in our home (although we had 25% down 7 years ago, we still are about the same or worse off due to falling markets locally), so getting a 2nd mortgage for the down pmt is not an option - most banks seem to cap out at 65-75% LTV for 2nds. (Canada)
I also have approx $25,000 line of credit at prime + 1.75%, but at 3% per month minimum payment, the payments would be too high for long term financing.
The most promising property I’ve found is a four-plex, with 2x2BR and 2x3BR and total income of $2450 per month, fully rented with long term tenants (6mo, 2, 4 and 6 years!). Income/Expense statement shows a positive cashflow of $20,800 annually before financing costs. Asking price is $199,000 - I offered $170,000, they countered at $195,000, I countered at $175,000, and they countered at $190,000 FIRM.
If I could finance 95-100% using a 75% first mortgage and the balance as a 2nd mortgage, I could see $100-300 positive cashflow, but if I have to use much more than 5% from my credit line, the monthly payments will eat up the cashflow.
The seller is a couple getting divorced, so vendor financing is not an option. There is an assumable mortgage, but the rate and payments are too high to consider, again unless I can get a low cost 2nd mortgage for the remainder.
I can’t seem to get any of the Nothing Down ideas to fit this equation, and I’m running out of time. I could accept the counter offer, and try to get financing, but I hesitate to do this unless I can be condifent that a solution can be found.