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$50,000 down payment - http://www.dealmakerscafe.com Forums

Original message

Jackie

"$50,000 down payment" , Sat 14 Apr 20:41

had an open house today and 3 people applied to buy the house.

One has $50,000 to put down for a $160,000 house.

I owe $138,000 with piti of $1300

Anyone have any experience with this BIG of a down payment?

I'm sure I need to send a chunk of it to the mortgage company but wouldn't that be a red flag?

the other problem is I would have a negative cashflow - so I would need to keep a reserve to cover that.

Anybody have any experience with a very large down payment???

Jackie

Replies:

Dealmaker
Moderator

"Re(1):$50,000 down payment" , Mon 16 Apr 08:18

I wouldn't be concerned about sending the mortgage company a large payment.

The key concern would be the negative cash flow. I would consider using the $50K to buy a few houses (creatively) and let them cover the negative cashflow. Once the Buyer refis or defaults, you'll have more cashflow from the other deals. I would consider buying a mortgage as well. It all depends on the numbers you give your buyer. You may consider a balloon in the note to your buyer; nothing short but a mid-term balloon.. 10 years for example.

Dealmaker

Will

"Re(1):$50,000 down payment" , Sun 15 Apr 10:55

Jackie,

I know that this goes against the Cafe philosophy but how about getting your own loan for 138-50=88k. at that low LTV,the payment will be low enough to allow a monthly cashflow of 6-700$.
after all, you are investing the buyer's money.
where else can you find this type of investment: the person that provides you the money to invest, is also making you the return on his money. and if he defaults, he's losing the money to you. And based on your buyer's history, chances are that it might happen again.

BuynSell

"This may sound silly!" , Sun 15 Apr 09:09

But if the buyer has almost 30% to put down on the property, why doesn't he just get a conventional loan?

Don't get me wrong! I'm happy for you. It's just that I don't understand the numbers here.

W.J. {BuynSell}

Jackie

"Re(1):This may sound silly!" , Sun 15 Apr 10:26

The first thing I'm going to do Monday morning is talk to the mortgage broker I work with and try to get them a loan since they have so much to put down.

The had a foreclosure 3 years ago and a Chapter 13 bankruptcy in 1999 - 2000 -- that's why they were looking for owner financing. They have been told they could not get a loan.

Jackie

Jackie

"On second thought" , Sun 15 Apr 11:52

I don't want him to get a new loan.

I'd rather just pay off the underlying loan in a few months and keep the cashflow.

This house is in a prime location and will apprecite quickly.

If he defaults I'll sell it all over again.

Jackie

Lynn
Moderator

"Re(1):On second thought" , Sun 15 Apr 12:27

Now that's a good idea!

Lynn

Knowledge is important but all the knowledge in the world is worthless without action! How many offers did "you" make today?

Lynn
Moderator

"Re(1):$50,000 down payment" , Sun 15 Apr 02:34

Hey Jackie,

I haven't had a deposit of that size, but I have had a few that exceeded my spread.

I base my decision on the underlying interest rate. If it is a high interest rate then it would make sense for you to pay the note down. On the other hand, if it is a low interest rate then you should consider whether you would get a better return on your investment somewhere else. The negative cash flow can be handled by putting some of your profit into your reserve.

Discipline has a lot to do with this decision to, but I know that you have plenty of that!

I'll cross my fingers for you!

Lynn

Knowledge is important but all the knowledge in the world is worthless without action! How many offers did "you" make today?

John

"Re(1):$50,000 down payment" , Sat 14 Apr 21:30

Hi Jackie,

I would think you can just make a lump sum to the mortgage company to reduce your debt. What's it to them if you make a lump sum deposit? (Gift from family member. Any number of reasons. Other than they would love for you to be indebted to them forever.

If you make a lump sum payment and align your outstanding balance to that of or just below your prospective buyers debt you should have positive cashflow (providing their interest rate is higher than the one you are paying).

Hope this sounds reasonable.

Regards

John

Terry (Houston)

"Re(1):$50,000 down payment" , Sat 14 Apr 21:04

Way to go Jackie!

That is a super down payment.

I don't know why it would tip off the lender if you applied some of that to the principle, they may think it is a tax refund.

On the other note, you have made your profit and then some. Knowing you, you could do quite a few more deals with the money in TODAY's dollars and make a heck of a lot more profit by the time this deals gets closed out totaly. I would think with your ability to invest in the right houses you could turn that into at least $150k in profit by the time this buyer gets refied.

When he get's ready to refi you have made the amount you would owe and more on the other investments. I would only offer this to the people who I know have been doing this for quite a while. I certainly don't think I would play that right now.

Congrats again!

Terry

...There is no chance no destiny no fate
that can circumvent or hinder or control
the firm resolve of a determined soul...

Ella Wheeler Wilcox

Terry (Houston)