How could I make this work?

[Chadler]

There is a townhouse i'm interested in for 600k. On the market for 10 days.



I want to put down 20% (40 in cash, and 80 in HELOC borrowed from a relative)



Is there a way for me to get a high appraisal, to pay them back the 90k right after I make the purchase? The appraised value would have to be 700k to work.



Is this possible?



Thanks in advance!

 

[bizaro86]

I've known people who have purchased for cash off their LOCs, then reno'd and refinanced right away on a higher appraisal to get the full purchase price back, but that might not be possible given the price point.



Speaking of the price point, will you be getting anything close to break even cash flow on a 600k townhouse? Even 8% net rents is 48000 year, or a rental rate of $4000 per month. The original rein system suggested finding properties where the rent was 10% of the purchase price.



Obviously, I have no idea where your proposed purchase is, so maybe rents of 4000+ per month are possible.



Regards,



Michael

 

[RedlineBrett]

[quote user=Chadler]



Is this possible?






If you aren't doing something to add 100k of value to the property then no, it isn't. Stay away from these kind of sneaky dealings. It's mortgage fraud.

 

[RobMacdonald]

If you're buying the place as your principal residence, the bank will finance the lower of the purchase price or appraised value.



I have had situations where the buyer does get a 'deal', a distressed seller or something like that. It is possible to complete and then refinance shortly after closing. Most banks will require you to own the property for at least 6 months before refinancing. Plus, so a significant jump in value in a short time, they like to see that some improvements have been made.

 

[WesSiemens]

If you aren't doing something to add 100k of value to the property then no, it isn't. Stay away from these kind of sneaky dealings. It's mortgage fraud.



This is only mortgage fraud if you lie to your lender about what you are doing. I have done a number of these deals, where I have purchased a property below appraised value, and then financed it on appraised value, not purchase price. What I have done is purchase properties on lines or credit and refinance after I take possession. I have done this with Scotiabank more than once and they knew exactly what I was doing.

The problem is your high price point makes it difficult unless you have that kind of money available on a line of credit or from a private lender. The most important thing is that you have an accurate appraisal done that your lender will accept before you proceed.



wes