Investment Property Mortgage Question

CU Tiger · 10-27-2010, 11:24 PM

I know we have a few in Real Estate and a couple in the finance mortgage end so I thought here would be as good a place as any to ask.

Anyone have any insight into mortgage/loans on purely income property?

We have a few rental houses, but all were either residences when we initially bought them, or were paid cash for. I have an opportunity that just came up tonight to possibly pick up a number of rental properties that are priced as such to cash flow strong day one. Basically the owner is tired of them and wants to dump them.
So.....

Is 100% financing an option?
Would conventional mortgage/PMI rules apply?
What about the appraisal process? I am pretty sure these wont appraise for the sell price, but as a business venture they are a no brainer. (Basically a 300k sell price that is generating $5800/month in revenue)

If I wanted to I could always tap my BLOC on our contracting outfit, but I'd really like to make that a last resort...

MikeVic · 10-27-2010, 11:25 PM

Bot alert.

CU Tiger · 10-27-2010, 11:29 PM

huh?
Bot....really?

MikeVic · 10-27-2010, 11:36 PM

lol well your initial post had a ton of typos, read like one of those bot posts.

digamma · 10-28-2010, 01:09 AM

There are a ton of new lending rules out there. Some of the mortgage brokers on here may know them very well, but the scrutiny on second (or third) properties is very high and a lender may not look to just the property for a lending decision. You will obviously want to talk to a local broker or lender as well.

Good luck.

Mustang · 10-28-2010, 02:39 AM

Quote:

Originally Posted by CU Tiger

I have an opportunity that just came up tonight to possibly pick up a number of rental properties that are priced as such to cash flow strong day one. Basically the owner is tired of them and wants to dump them.

Why is he tired of them?

MacroGuru · 10-28-2010, 09:02 AM

The statement he is tired of them...with them bringing in close to 6 a month in revenue is a red flag for me.

Most rental properties have minor issues and details which you are aware of, but the phrase "tired" of to me means he is having issues with either the tenants or the property and he is wanting out.

I have asked a friend that is in the industry for you...if he gets back to me, I will let you know.

CU Tiger · 10-28-2010, 09:48 AM

Quote:

Originally Posted by MacroGuru

The statement he is tired of them...with them bringing in close to 6 a month in revenue is a red flag for me.

Most rental properties have minor issues and details which you are aware of, but the phrase "tired" of to me means he is having issues with either the tenants or the property and he is wanting out.

I have asked a friend that is in the industry for you...if he gets back to me, I will let you know.

For what its worth I know the owner and the properties fairly well. The owner is very wealthy and owns a ton of businesses and is just getting out of the whole rental house deal (he currently has over 40) in his words, "I am sick of phone calls at 2Am because some moron clogged their toilet and doesn't know to buy a plunger at WalMart"

Anyway, yes these are low level properties, its actually a small mobile home park and 3 "houses"...I have 7 other rentals, all paid for. So push comes to shove I can mortgage those etc.

Have a meeting at 3 with my banker and we will see what the options are then. It is my experience that there is never a shortage of renters for low level properties though.

MacroGuru · 10-28-2010, 10:12 AM

And the info from my friend..

1. there isnt 100% financing, but he may ask the owner to consider seller financing where he simply takes over the note/payment and swaps names on title.

2. you avoid the appraisal process this way since its really more of a matter of settling prices between 2 parties. If the parties cant come to an agreement, they may agree to simply let an appraisal determine sales price; this is a fair method of settling disparity.

3. a $300k property at today's rates (5% commercial or 4.25% residential) should really only cost $18k/yr (or $1500/month + property taxes and insurance) so a rental/business income of $5800 should net a 200-300% ROI; a no-brainer.

Hope this helps...

CU Tiger · 10-28-2010, 10:21 AM

Thanks for inquiring!
Owner financing wont work in this case, the sole reason he wants 300K is to buy another property for one of his automotive franchises that is his day job...

Hrmmm....going to have to get creative...

10-28-2010, 01:09 AM	#5
digamma Torchbearer Join Date: Sep 2001 Location: On Lake Harriet	There are a ton of new lending rules out there. Some of the mortgage brokers on here may know them very well, but the scrutiny on second (or third) properties is very high and a lender may not look to just the property for a lending decision. You will obviously want to talk to a local broker or lender as well. Good luck. Last edited by digamma : 10-28-2010 at 01:09 AM.

10-28-2010, 09:02 AM	#7
MacroGuru Coordinator Join Date: May 2003 Location: Utah	The statement he is tired of them...with them bringing in close to 6 a month in revenue is a red flag for me. Most rental properties have minor issues and details which you are aware of, but the phrase "tired" of to me means he is having issues with either the tenants or the property and he is wanting out. I have asked a friend that is in the industry for you...if he gets back to me, I will let you know. __________________ "forgetting what is in the past, I strive for the future"

10-28-2010, 10:12 AM	#9
MacroGuru Coordinator Join Date: May 2003 Location: Utah	And the info from my friend.. 1. there isnt 100% financing, but he may ask the owner to consider seller financing where he simply takes over the note/payment and swaps names on title. 2. you avoid the appraisal process this way since its really more of a matter of settling prices between 2 parties. If the parties cant come to an agreement, they may agree to simply let an appraisal determine sales price; this is a fair method of settling disparity. 3. a $300k property at today's rates (5% commercial or 4.25% residential) should really only cost $18k/yr (or $1500/month + property taxes and insurance) so a rental/business income of $5800 should net a 200-300% ROI; a no-brainer. Hope this helps... __________________ "forgetting what is in the past, I strive for the future"

10-27-2010, 11:25 PM	#2
MikeVic Head Coach Join Date: Mar 2003 Location: Hometown of Canada	Bot alert.

10-27-2010, 11:29 PM	#3
CU Tiger Grizzled Veteran Join Date: Nov 2006 Location: Backwoods, SC	huh? Bot....really?

10-27-2010, 11:36 PM	#4
MikeVic Head Coach Join Date: Mar 2003 Location: Hometown of Canada	lol well your initial post had a ton of typos, read like one of those bot posts.

10-28-2010, 10:21 AM	#10
CU Tiger Grizzled Veteran Join Date: Nov 2006 Location: Backwoods, SC	Thanks for inquiring! Owner financing wont work in this case, the sole reason he wants 300K is to buy another property for one of his automotive franchises that is his day job... Hrmmm....going to have to get creative...

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