Creative Financing Needed

[ChrisLautischer]

My family of 4 is looking for a 3 bedroom home in the Edmonton area (must have a wooden fireplace.. odd that that's one of the only requirements eh? Lol).

We do NOT unfortunately have a down payment large enough to cover the requirements with less than perfect credit (my beacon score is low 500s but my income is $100k+/yr ... my girlfriends income is significantly lower (especially on mat leave) but has a better credit score).

If you have any ideas for a creative financing option excluding rent to own (right now we pay the fine folks at Boardwalk over $1500 a month, plus utilities, an extra parking stall and a pet fee for our tiny football aka. Girlfriends dog (she can't read this can she?) .. and don't want to spend much more.. preferably (like everyone) we would like to spend less.

Feel free to contact me at 7808638102 or via email at chrislautischer@gmail.com

Thanks in advance

 

[Sherilynn]

Buying with seller-financing via Agreement for Sale is possible, but usually only with a substantial down payment (at least 15% - and normally 20% - for my company).

With any less than 15% down, rent to own is likely your only option.

$1500 per month wouldn't work for a rent to own on a decent house in Edmonton. It could potentially work for an AFS 'mortgage' payment, depending on the amortization, but again you need a large down payment.

 

[Thomas Beyer]

Save money, spend less, work on your credit, cut up all "credit" cards after they have been paid off, do not have a car loan. Then you can afford a house with 5% down and improved credit, perhaps even for Christmas 2015 !

What loans and "credit" card balances, if any, do you have ? How long would it take you to pay them off ?

Unclear to me how someone with 100,000+ income plus an income producing partner does not have any savings. What happened ? You should be able to save 25,000-35,000 in a year with prudent spending.

Buying a house in Canada is very easy: save 5% (or more) and get a mortgage. You should have no other loans or debt besides a mortgage. If you do, change your habits and pay the debt off first, then re-apply for a mortgage.

 

[Seeley]

It is not realistic on your part to be seeking creative financing as an answer to your problem when your real problem is questionable money management. You need to concentrate on getting your personal finances corrected by elevating your credit score and savings to an appropriate level where you can qualify to buy. Until then you are not ready for home ownership.

It is not prudent on your part to be even thinking of buying a home until you get your personal financial house in order.

 

[bizaro86]

If you have a 100k income, bad credit, and not enough cash for a down payment, lack of creative (==high interest) financing is not your primary problem. You need to save some money and improve your credit, probably by deferring gratification. So don't buy now, go read the mr money mustache blog, implement half his ideas, pay your bills on time and save 15 to 40k. Then buy a house with a cheap mortgage from a prime lender. If you do an agreement for sale, rent to own or anything else creative, you're basically paying someone to take a risk on you when you're a bad risk.

 

[Neil1]

Hello Chris,

Yes you have a good option.

I think, as opposed to the recommendations above, the following is your best option:

- Buy as soon as possible a pre-construction/pre-sale property (perhaps freehold town home) on paper from a builder. Best if you can find a 'VIP' price - not that it is necessarily much lower than future buyers will pay, but mainly since it means you are among the first buyers (new project) Years from closing - usually 1-3 years till closing.

- Find a way to pay the deposit required! - use your visa card if needed, a loan, family, LOC, anything! The reason this is so important is I do not want you to lose time = value appreciation on the property you can buy now.

- Now work on the recommendations from the nice people above trying to help you - improve your credit, save, etc. You have good income as mentioned. There is no reason not to save enough and improve your situation by the time you close and get the key to your new place.

In other words, be creative so you can buy now and close later, don't buy later and lose value appreciation now. this loss of value appreciation can easily equal the entire amount people think you should save before you buy. (you will save but this will be extra, not instead of value appreciation

Sincerely,

N.

BONUS - now that you put a deposit I know you will do whatever it takes, in order to close in 1, 2 or 3 years. Money talks and not losing your deposit will be a great motivation for you to do all is needed to close. Otherwise, if you can not close you will lose the money deposited and the developer will get to keep it.

 

[Sherilynn]

[quote user="Neil1"]

I think, as opposed to the recommendations above, the following is your best option:

- Buy as soon as possible a pre-construction/pre-sale property

[/quote]

I strongly disagree.

Generally, when you put a purchase deposit down on a presale, it is non-refundable. So if "1, 2 or 3 years" from now you are unable to close, too bad for you - you forfeit your deposit.

And what if the market slumps? For example: you put a deposit on a property and you agree to pay $300k, but when the time comes to buy, the property is worth only $250k. You are still obligated to pay $300k and now must come up with the additional $50k that the bank won't finance because the bank will only finance based on current appraised value.

[quote user="Neil1"]Money talks and not losing your deposit will be a great motivation for you to do all is needed to close.[/quote]

Really? The threat of losing your deposit will somehow compensate for the fact that you either can't qualify for a mortgage or the property is worth less than the contracted price? Or both???

I think not.

 

[Neil1]

Hello,
I still think he MUST buy now for the reasons mentioned.

Use what if questions properly and you will grow your business phenomenally.
You obviously already do that. Had you not, you would not be here investing and owning much.
In other words, what if questions should not be confused with analysis paralysis.
Lets encourage the community to be successful and buy. and yes do your due diligence too.

You see, what if the sum value of all your properties is worth half its current value in 3.5 years!?
Who cares, waste of time. You will probably not sell, will cross the bridge when you get there, etc.
Yes, it and many other things can happen. The fact is you and I are not selling because things can happen.
Lets encourage REIN's community to do the same

Sincerely,
N.

 

[Sherilynn]

Neil, asking what-if questions should uncover potential risks and rewards, so one may analyze if the risk is acceptable considering the range of possible rewards.

Your approach sounds like "let's analyze the risks and then jump in regardless." I'm sure I must be misreading your message, as you appear to be an intelligent investor. (My point is that your message seems a bit contradictory and confusing.)

Furthermore, one's risk tolerance should change based on one's current situation. For example, I would never recommend that a new investor or first time homeowner buy preconstruction, especially a single family unit or a condo. However, I have recently ordered 3 new up/down duplexes from a builder. The difference? a) Excellent up/downs are rare, so the market for them is stronger. b) They cashflow far exceeds that of a similar single family unit. c) I'm buying in bulk and getting the properties for well below current market value. d) If the market dips, I am in the position to make up the shortfall should the appraised value at completion be lower than anticipated (read: lower than I need it to be to support the purchase price).

The above reasons don't normally apply to first time buyers or new investors.

And finally, the thread was supposed to be about creative financing solutions, and preconstruction from a builder doesn't fit that mold.

 

[Thomas Beyer]

[quote user="Sherilynn"]The difference? a) .. b) .. c) .. d) .. [/quote]

your forgot

e): you have far more experience today to judge the market and the products within in, and

f) you have far more experience operating the asset once owned !

 

[Sherilynn]

[quote user="ThomasBeyer"][quote user="Sherilynn"]The difference? a) .. b) .. c) .. d) .. [/quote]

your forgot

e): you have far more experience today to judge the market and the products within in, and

f) you have far more experience operating the asset once owned !

[/quote]

That too. Thanks, Thomas.

 

[Neil1]

[quote user="Sherilynn"]I must be misreading your message,

[/quote]
Correct.
[quote user="Sherilynn"] you .. an intelligent investor.

[/quote]
Thanks
[quote user="Sherilynn"]one's risk tolerance should change based on one's current situation.

[/quote]
Correct.. one's situation even includes his/her personality.
[quote user="Sherilynn"] ..The above reasons don't normally apply to first time buyers or new investors.

[/quote]
Correct.. they are also not the reasons he should buy a pre-construction home. The reasons were mentioned earlier.[quote user="Sherilynn"]the thread was supposed to be about creative financing solutions, and preconstruction from a builder doesn't fit that mold.

[/quote]
The thread is about real estate. Helping is fine. Helping others in anyway is fine.

My 0.0200 Dollars - he MUST buy as soon as he can.

Sincerely,
N.

 

[Seeley]

Neil1 your are out of step with intelligent investing and your advice is in no way helping this individual.

Your advice is responding to a "want" not a "need" and based on his financial situation your ill advised opinion is only likely going to lead him to disaster.