I found a Real Estate Investor who was in the process of liquidating his properties. His last property was a duplex used in Section 8. The property was being taxed at a value of $40,000 (his purchase price), but had a remaining mortgage of $30,000.
The deal was for an assumable loan on my part with the bank. The bank would not do an assumable loan, so we drew up paperwork for a loan in the amount of $30,000.
Here’s where the deal has come to a stop. The appraiser decided that since we were purchasing for $30,000 that the value of the house was now $30,000, instead of the $40,000 that we were hoping for. Now the LTV Ratio is above the 70% mark that I needed to keep me from putting my own money into this deal upfront.
Without investing roughly $7,000 as a down payment, does anybody see any solutions to keep this deal alive as we intended it to be?
Thats the trouble with using banks. They want cash down. I have found that I do better with banks financing after I own the properties free and clear. For example, recently I had three free and clear rentals. I borrowed twice what I paid for them. The bank had them appraised and loaned 80%.
I bought another property last year, a HUD foreclosure for $32,500.00. I used my cash then got a loan using the house as collatteral. The house appraised at $50,000 and I got a loan for $40,000.
The key word being creative. Paying cash and then refinancing works great I guess if you have money. Most of us dont have that…at least not when we start.
My last purchase was a house I closed 2/8/13 on land contract and signed a lease on 2/12/13. Currently, I mean everything figured including insuarance I have a little less than $150 actual cash tied up. Thats creative dealing…
In this case I would look at 2 options…
1st- see if the bank would loan 60-70% of the purchase price and allow the seller to hold a 2nd mortgage on this property or another if you have one.
2nd- see if the seller do a land contract with a 3-5 year balloon so you can build some equity through amortization and refi through a small local bank.
Good luck and keep us updated in this thread as to how it turns out.
Im closing a house on contract with very little down in a few weeks that will put me at $610,000 in land contract purchase with low downs since August 2011.
You can build a portfolio with very little capital. The deals are out there.
Thanks for the information. Here is what happened. The bank decided to waive their 70-75% LTV Ratio for me, thanks to the owner asking them to make this happen for a new investor. I paid $2000 ($500 appraisal, $1500 closing), and have the duplex for $29,500.
It is rented through Section 8 ($375 x 2/month)…mortgage, insurance, property management co, taxes and water cost me roughly $470/month.