Posted by GL(ON) on December 05, 2006 at 18:15:39:
“I’m sure about jail time, but it isan actual law only if you want to refi and get cash-out. The banks sure will refi but no cash out. That being said, I don’t know any other options that might prevent me from accessing to this equity including note discount option.
Again, thank you for the education. I truly appreciate it.”
If that is the case how about offering the seller a second deed of trust on your house? I know the banks hate it when you put one on the property you are buying but if it is another property they couldn’t care less.
Here is what I mean.
Let’s say you offer the seller $500,000 for his property.
$475,000 in the form of cash
$25,000 in the form of a note secured by your house.
You could even give the seller a note for $50,000. Take out a mortgage from the bank for $475,000. And get back $25,000 change at closing.
I own a house in Dallas, TX. On tax value it is worth $193K. On a actual appraisal, it came out $190K. I only own one primary note of $159K. I problem is I want to buy a few cash-flow properties with 5% Down because the credit has some bruises. However, the Texas Refi-Cahs-out law is killing me! I need to access to all of my equity, or alteast I think I do. But the law says I can only cash-out 80% of equity minus the Note. I need some creativity and help from the pros.
Re: Texas 80/20 Rule is killing me… - Posted by GL(ON)
Posted by GL(ON) on December 05, 2006 at 16:26:17:
Is this an actual law or only a bank rule? How many years in jail can they get for lending you too much money?
Could a private seller take a second on your property as a down payment? Banks don’t mind that.
Here is another idea. Can you buy good notes at a discount of 25%?
Let’s suppose a seller will agree to take back a note, secured by notes that you own. In other words you would buy notes and use them as collateral for a note to be held by the seller.
Hypothetical example. Seller agrees to sell you his rental property for $500,000. You agree to pay $400,000 in the form of cash, and the other $100,000 in the form of a note, secured by other notes that you own.
You get a 95% loan from the bank using the property as collateral. This means you get $475,000.
$400,000 goes to the seller
The other $75,000 goes to buy notes at a discount, that have a face value of $100,000 or more. These are what you use as collateral for the seller’s note.
There are lots of other ways to do what you want to do. This is standard seminar fare. You should get “Nothing Down” by Robert Allen, or Carleton Sheets’ course, there are dozens of different ways to do what you want to do.
Re: Texas 80/20 Rule is killing me… - Posted by george
Posted by george on December 05, 2006 at 13:34:06:
Mike,
It’s not the law that is killing you. It is what it is. It is designed to protect investors from committing financial suicide by extending themselves too far.
If you can’t come up with 5% down payment, this says you have no reserves and the bruised credit says you’ve been living too close to the bone.
Perhaps you should liquidate the house if the equity is real, not just paper equity. Perhaps do a little wholesaling. You need to build up some reserves if you are planning to acquire additional properties. The road to RE financial disaster is paved with the bones of those without adequate reserves.
I hit a similar problem trying to use equity in my 30+ acres. I had a agriculture tax exemption on all but one acre, which I had homesteaded, and by Texas law, you must have over 200 acres before you can borrow against the land if your homestead adjoins.
I borrowed against other assets, my Harley and two pickup trucks. Also you might look at a “home improvement” loan.
Gl,
I’m sure about jail time, but it isan actual law only if you want to refi and get cash-out. The banks sure will refi but no cash out. That being said, I don’t know any other options that might prevent me from accessing to this equity including note discount option.
Again, thank you for the education. I truly appreciate it.