Finance Help Please

[karlpie]

I'd love to be able to capitalize on at least one of the five properties I'm pursuing at the moment but still get scared off by the financing needed. Must be because I don't have the best credit but then who does nowadays? I can only do this with some sort of creative financing, like seller financing.

**** I found a horse farm complete with about 15 stable horses used for classes plus another 25 or so horses that are privately boarded. Plus they also buy and sell horses so the cash flow is definitely there. Problem is in that current owners did everything on cash and have only the last two months worth of figures on paper. Never done before which scares me a bit. Place has a separate 4 bedroom home to live in but house really needs some major finishing work. Never intended to look into this but it kinda just happened.

**** Another property I'm considering would be great for an office network/complex I'd like to start up but it would also double as an animal complex of some kind as it comes with 6 acres of property that has additional metal building plus a couple more run down stables.

**** Then there are three other single family homes that I'm looking at that I would either lease or rent out or quite possibly use as my office network complex as well.

The only way in which I could even think about investing at this time is through an alternate way of financing and not the conventional bank/lending route. I'd like to believe that I could use one property over another as collateral to get myself up and running in this venture but I need help in further understanding the whys and wherefores regarding this whole scenario.

Of course, being an Illinois realtor as well I already have a number of bad credit/poor credit buyers that are just dying to get into a home of their own but they too need to have this alternative way to the typical financing. One is even a disabled vet and can't get his job back and the va says he doesn't qualify. That, I don't know how I can help with but I haven't given up on him.

I'm looking into various grants, loans and loan guarantees that the government offers but am somewhat dragging my feet on this as well only because the knowledge and confidence is lacking still.

That's why I'm reaching out to you here. I'm hoping one or some of you will be able to help me out here .... even if it's to say that there's nothing I can do. That's a start. :)

Your input will be greatly appreciated!

:icon_verw

[Dan Auito]

I'd love to be able to capitalize on at least one of the five properties I'm pursuing at the moment but still get scared off by the financing needed. Must be because I don't have the best credit but then who does nowadays? I can only do this with some sort of creative financing, like seller financing.

**** I found a horse farm complete with about 15 stable horses used for classes plus another 25 or so horses that are privately boarded. Plus they also buy and sell horses so the cash flow is definitely there. Problem is in that current owners did everything on cash and have only the last two months worth of figures on paper. Never done before which scares me a bit. Place has a separate 4 bedroom home to live in but house really needs some major finishing work. Never intended to look into this but it kinda just happened.

Looking at the choices Karen, I would begin to gravitate towards the horse operation with a dwelling to boot, my first question would be why are you selling? and of course how much are you asking? If the price was right then I would write an offer contingent upon my being able to verify income and get leases in place for those who intend to stay!

You would also do well to check insurance rates for the operation and property and factor in the cost of having a full time stable hand to take care of the myriad of issues and details related to horse crap (literally) we have two horses out front.

The reason I like this senario is that the house can be improved and the horse operation can be lucrative but it does entail serious dedication and work.

Again finance is also a consideration as you mentioned not having a boat load of cash, are the owners willing to carryback any financing? Do you have any capital to invest, can you call in a co-purchaser on a loan with them reaping the rewards from the stable operation, what about contacting or suggesting this to a couple of those horse owners that you will be interviewing about their future intentions of boarding? Maybe with your contingency clause in place you could have half of the boarders who are willing to stay pay you six months in advance(small discount) to come up with a down payment required to swing the deal.
Another property I'm considering would be great for an office network/complex I'd like to start up but it would also double as an animal complex of some kind as it comes with 6 acres of property that has additional metal building plus a couple more run down stables.

Sounds like this could be a veterinary clinic with boarding potential of all kinds, I would check into speaking with a few local veterinarians as potential partners on this if this was the investment choice.( no owner occupied preferential financing or roof over your head on this one)**** Then there are three other single family homes that I'm looking at that I would either lease or rent out or quite possibly use as my office network complex as well. (These seem to be the least desirable choices to me, are they zoned mixed use or will the neighbors complain, price, reason for selling, owner finance carryback potentil questions all apply as well.)

The only way in which I could even think about investing at this time is through an alternate way of financing and not the conventional bank/lending route. I'd like to believe that I could use one property over another as collateral to get myself up and running in this venture but I need help in further understanding the whys and wherefores regarding this whole scenario.

Of course, being an Illinois realtor as well I already have a number of bad credit/poor credit buyers that are just dying to get into a home of their own but they too need to have this alternative way to the typical financing. One is even a disabled vet and can't get his job back and the va says he doesn't qualify. That, I don't know how I can help with but I haven't given up on him.

I'm looking into various grants, loans and loan guarantees that the government offers but am somewhat dragging my feet on this as well only because the knowledge and confidence is lacking still.

That's why I'm reaching out to you here. I'm hoping one or some of you will be able to help me out here .... even if it's to say that there's nothing I can do. That's a start. :)

Your input will be greatly appreciated!

:icon_verw

I can't say much about your potential clients needs but you do have some potential options, especially on the horse property, How many acres is it on, what is surrounding it, can it be subdivided? Why hasn't a horse boarder picked up the property by now, I know they know it's for sale! I think the more questions you can get answered upfront the sooner you can start looking at further options, I would investigate the horse operation heavily until it became a no go for whatever reason and then continue down the list.

Where there's a will there's a way! Hope this helps. Keep filling in the blanks on this one and we'll keep going!

[karlpie]

I have worked up some additional information regarding this request for any of you interested in giving me your suggestions and advice. Let me thank you, in advance, for any input you may render to me regarding this.

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Horse Property:

9.98 acres with additional adjoinging acreage that has been leased out from Com Ed. Have to find out size of this acreage

Sold 03/27/03 for $550,000, originally listed for $635,000 with price reduction to $620,000 and finally sold to present owners for $550,000 on 03/27/03. It’s now listed for $650,000, reduced from $680,000 September 19, 2004.

Personally feel that monies invested by present owners went into getting the house renovated and still needing major overhauling for completion. Don’t believe anything went into horse operation at all, including the fact that they did not keep financial records of the operation.

They have a gal hired to handle desk for their riding classes, etc. but have to find out salary. Remaining figures have been calculated by local businessman who is now inputting all the financials into spreadsheet but November and December, 2004 are the only figures available as of this date. Other figures will have to be projected as best as possible. Will have to ask for tax returns for last 3 years when I get to that point.

They own about 19 horses that are used for classroom training and have an approximate value of $47,000. They have 34 stalls for boarding with 19 of them being used by their stable horses, about 8 others being boarded inside at $355.00/month with an additional 4 horses being boarded outside at $250.00/month. Agent gave me this information but she wasn’t sure if these were accurate so I have to verify this information.

The other income and expense figures given me will have to be projected out judging from what they’ve given me. Haven’t done this yet but will get back to you on this when I have it done.

Looks like present owners may have been able to take advantage of “owner may help” terms as is listed in old property listing. Present listing does not signify so I don’t believe that this will be an option but I will work on presenting it in some light with creative financing. By the way, Dan, thank you for your suggestions regarding financing. I will re-read what you’ve written and get back to you on this.


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Office Network Complex

This is a great piece of property …. At least as far as I’m concerned. This particular piece of property has been “taunting” me ever since I pulled it up the first time in my personal searches at night! It kept coming up after that and kept telling me to go look at it. I didn’t really see anything great about this property but boy, when I went through it, it’s a very unique piece of property! It could be an excellent in-law arrangement complete with a kitchen downstairs. It has two side entrances/exits which could be used for business (animal business/horse boarding, etc/tack room), it’s got an additional room within the 3 car garage and off to the right of the garage is a detached metal building which is where the animal business probably will go … even though I couldn’t get in to see the inside of this building. I’m writing this offline since it is so lengthy so I can’t remember what suggestion you made as far as an animal business went but I know that I liked it when I read it!

When I went to walk the inside of the 4 bedroom house, my heart started jumping, palpitating, skipping a beat without any suggestion from me! This has never happened to me before with any of the properties I have ever shown in ten years! Not only did the house have 4 bedrooms, but three of the 4 bedrooms had their own separate and private bathrooms …. Perfect for private offices for an office network complex!!!!!

The house is a bi-level or a raised ranch so when you walk in, you either go up or down. Going up led you into one of two huge “family-room type” rooms separated by a view-through woodburning fireplace. The thought didn’t come to me at first but upon further consideration, one of those rooms could be the reception area and the other could be a huge conference room! I loved it! Not only that, downstairs had a huge rec room with a wet bar and I thought I could probably convert that into an exercise room complete with a kitchen down there but I’m not sure.

Now this home has been on the market for quite some time. It has 6.10 acres, 1 metal outbuilding, 1 crib like shelter in back of property, 1 roofed shelter of sorts that might be good for something like goats, 1 good sized barn but needs work and then the home. The driveway is long and veers off to the right and leads right up to the metal building. Perfect for the animal business. You mentioned getting a vet involved. I’m way ahead of you! There’s an actual vet located on the corner of this very same street so I’m already thinking about sitting down with them to see what can be arranged! I’ve also considered becoming a non-profit organization for further perqs and I’ve begun to look into government grants, loans, and loan guarantees to help with this endeavor although I don’t have anything in place yet (cuz I’m dragging my feet cuz I’m a bit petrified of this whole thing and how it’s all seems to be falling into place)!

Home has been on market for some time now. Originally on the market 07/03 for $614,900, then reduced 09/18/04 to $525,000, reduced again on 09/25/04 to $490,000 and presently listed at $465,000. According to listing, finance terms are “conventional, fha, va, rent with option, and other (which could mean anything).

Again, the financing is my stumbling block when it comes to investing and would appreciate any advice and suggestions.

Again, thank you, Dan, very much for all your help so far.

The other three properties are actually well suited for the office network complex environment. They’re single family homes that I’d like to convert into an office complex with the first of these being the complex I set up my own office in.

[Dan Auito]

I did reply to you in an e mail Karen as the reply took up quite a bit of space.

[DionEvalueMortgage]

A couple of things that I need to make sure I understand from your post.

How is the properties listed? SFR, Rural, Land or commercial, etc?

Also, how much money are you prepared to put down?

Depending on how that property is listed will depend on how your finacial dealings go. If you can take the loan on non-commercial terms you should be just fine. If you have to take the laon on as a commercial loan you might have some work ahead of you.

I am not really sure what you mean as far as creative finace. If you (the borrower) has bad credit you will basicly need to put down more money and will qualify for a higher interest rate. I speak with many people who say they have bad credit and it is not that bad at all. So I would need a little more information on that too.

I would love to help you more. You can email me the information or post it here and I will reply as soon as I see it. Be specific in terms of what your scared of or what you don't understand. :SM026:

[karlpie]

A couple of things that I need to make sure I understand from your post.

How is the properties listed? SFR, Rural, Land or commercial, etc?

The horse farm is listed as a detached single family home but it is a confidential listing. The agent is pretty vague in what she mentions about this property as it is very well known in the area and the owners don't want it to get out that they are selling.

The office complex properties are listed as detached single family homes as well.

Also, how much money are you prepared to put down?

Being that I have my real estate license, I am looking to use my commission as a down payment and then possibly have seller financing come into play for a second or maybe even look into the possibility that the current owners may already have a note like that in place (which may very well be the case with the horse farm ... I still have to check into that. If I need to come up with more than that, I was thinking of arranging a delayed payment over a certain amount of time to pay the full amount to sellers OR I was also contemplating going in with a low offer (try for 65% LTV but no more than 85/15/5).

Depending on how that property is listed will depend on how your finacial dealings go. If you can take the loan on non-commercial terms you should be just fine. If you have to take the laon on as a commercial loan you might have some work ahead of you.

I am not really sure what you mean as far as creative finace. If you (the borrower) has bad credit you will basicly need to put down more money and will qualify for a higher interest rate. I speak with many people who say they have bad credit and it is not that bad at all. So I would need a little more information on that too.

I will email you on this subject. I have a few major bills that have been suffering lately but that's it.

I would love to help you more. You can email me the information or post it here and I will reply as soon as I see it. Be specific in terms of what your scared of or what you don't understand. :SM026:

Well, investing is something that I've always worked on hard and long but when it came time to take the plunge, I would always chicken out due to the financing struggles and the fact that I could not see my way clear of how I was going to be able to get the financing to work. I stumble in this area and confuse myself CONSTANTLY. That's why in my real estate endeavors, I choose to have a lender take care of this area for my clients instead of me doing it. I hope this makes sense. If not, I'll be glad to try again to explain. :) Just let me know.

Karen

[karlpie]

Well, investing is something that I've always worked on hard and long but when it came time to take the plunge, I would always chicken out due to the financing struggles and the fact that I could not see my way clear of how I was going to be able to get the financing to work. I stumble in this area and confuse myself CONSTANTLY. That's why in my real estate endeavors, I choose to have a lender take care of this area for my clients instead of me doing it. I hope this makes sense. If not, I'll be glad to try again to explain. :) Just let me know.

Karen


I forgot to mention one other thing. I tend to conduct my own personal searches every night to find new properties with creative financing that might be well suited to what I want to do and after having responded to your last post, I checked this search out and came up with about another 5 or 6 properties that could be well suited for "lease or rent with option" types. I've got buyers but not in the areas of these homes. All I'd have to do on these is to find a renter or a lessee!

One more thing, there is a parcel I'm still trying to get in to see that has four buildings (2 are homes and the other 2 are office buildings) all owned by same person. He's looking to sell this batch of properties all together and this parcel would probably handle all the projects I have planned at once. Owner has been difficult to reach so I haven't been able to check them out but once I do I have a feeling these would be perfect for what I want to do. They're on a main highway and the traffic and parking would be fantastic for me and my endeavors! (location, location, location).

[DionEvalueMortgage]

The good thing here is, is they can be purchased under "residential" pre-tenses. That is good!

What you would like to do with the property should not be shared with the lender during the transaction.

The next step is seeing what you qualify for before getting into seller held second's or any other creative finance. Knowing what the seller is going to accept to let the property go is the other peice of the puzzle that would need to be filled in once you know what you can qualify for.

From there many things are possible. Example - the owner refinaces into an assumable mortgage and pulls out his cash and then you pay to assume that mortgage. A seller held second is always an option. You would only need to worry about these if you don't qualify for enough of a loan to cover the price.

Investor programs rarely go up to 100%, although there are some. Usually 90% is the best you will get.

You will need the contracts for tenants in place to offset you DTI (Debt To Income) with good contracts heck the world is the limit. Hit me up on an email and we can discuss in private what your looking at in terms of qualify. :SM018:

[karlpie]

The good thing here is, is they can be purchased under "residential" pre-tenses. That is good!

**** That's good news alright! We're going in the right direction!

What you would like to do with the property should not be shared with the lender during the transaction.

**** Understood. Good insight into the makings of the minds of lenders.

The next step is seeing what you qualify for before getting into seller held second's or any other creative finance. Knowing what the seller is going to accept to let the property go is the other peice of the puzzle that would need to be filled in once you know what you can qualify for.

**** I was led to believe that qualifying for a loan is something that has to be done, however, in some cases, going through the conventional way of financing can be averted and other methods of financing can be had, such as seller financing, if all factors fit .... which is why I prefer to work with expired listings and fsbos.

**** Knowing what the seller will accept would be great if you could get that info but when it happens to be an active listing on the market at present, getting that information is difficult to do as it is considered privey between the owners/sellers and the listing agent, as I'm sure you are well aware of. When working with fsbos and expireds, it's easier to work this out and find out this information in a very casual and relaxed atmosphere .... which is why I prefer to work with them, but that is not the case in this situation.

From there many things are possible. Example - the owner refinaces into an assumable mortgage and pulls out his cash and then you pay to assume that mortgage. A seller held second is always an option. You would only need to worry about these if you don't qualify for enough of a loan to cover the price.

**** Yeah. I mentioned to you earlier what I try to do with owners/sellers. The primo scenario would be to purchase the home at 65% LTV but that many, many times is unheard of. Then I try to work my numbers out at 75% LTV and can usually muster up some business that way. Then my last resort is like I told you earlier, 85/15/5, which is 85% LTV with 15% in a second and 5% down which can be spread out over a certain amount of time in monthly payments at a certain percentage rate.

Correction on this. I realized I input an incorrect figure here. Instead of "85/15/5", it should be "85/10/5" which is 85% LTV, 10% second, and 5% down payment. Sorry! :SM031:

Investor programs rarely go up to 100%, although there are some. Usually 90% is the best you will get.

**** I have never heard of this rate. I have been told, however, that investors will pay a higher interest rate for any loan they get from anywhere for any investment property they are looking to acquire. The seconds, if there are any, would be at a lesser % rate but still high so seller can make money on his money acting as the bank in these cases.

You will need the contracts for tenants in place to offset you DTI (Debt To Income) with good contracts heck the world is the limit.

**** I can see getting the contracts for one of the properties in question, but the other one is more of a business and I'm not sure if that would be something that could be done.

Hit me up on an email and we can discuss in private what your looking at in terms of qualify. :SM018:

**** I will send you a private email regarding this last item and we can take it from there.

Thank you so very much for the time and effort you've put into this answer for me. It is very helpful and I'm sure that others here will be able to benefit from it as well! :SM065: