Loans secured by RE with deferred payment?

cottage, trees, path-2955582.jpg

Loans secured by RE with deferred payment?

Posted by: Regina Mar 29 2003, 01:29 PM

My husband and I are unemployed computer people having lots of difficulty replacing the high income jobs we had a year ago. We have 2 properties (1 valued at 130k – with a mortgage of 40k the other valued at 160k with 110k left on the mortgage). My husband is selling cars and I am selling avon to keep from losing either of these houses. We found 2 cottages at a popular Adirondack resort and would like to buy them and rent them for the income and investment value (it is projected with that they will pay for themselves and provide us with additional income) Is there any way possible for us to do this with barely enough income to get by as it is? Would there be any way for us to get a loan for a different proberty up there that we would convert to a bed and breakfast, with deferred payments so we could get the property up and running before having to pay it back? (without selling either of our current residences).

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Posted by: loanuniverse Mar 29 2003, 03:53 PM

I had the perfect answer for you until I read the last sentence. Not being able to sell one of the properties and getting a hold of that nice built up equity represents a bit of a problem. First let me say that by browsing for “Adirondack” in google, I came up with some really nice information about the area/park and it looks really nice. The problem that I see with getting finance from a regular “prime” lender comes down to the following:

Down payment Financing property that will be used as income property usually requires a significant down-payment. I am talking about 20% in most banks.

Source of repayment One thing is to purchase an office building or apartment building with established tenants, another one is to purchase 2 cottages and then turn them into seasonal rental properties. I am going to assume that the properties will not be rented full time.

Secondary source of repayment Even if you could convince the lending officer to fight for your loan and submit the request for analysis. If a request like this came to my desk, I would have no way of mitigating the uncertain primary source of repayment sometimes we can use the income from other sources to mitigate a primary source of repayment.

The good news is that the idea of a bed and breakfast if well researched and properly documented might be more workable. Using resources such as the sba and armed with a good business plan , you might be able to get financing for that. You will need a strong package, but it might be workable. I would research industry information, prepare a plan and meet with a couple of loan officers in the area.

Bottom line is that the equation of risk = reward always holds true. At the moment, your situation and the proposed loans probably don’t meet the risk parameters of a regular bank. You could probably get financing from other financial institutions, but your interest rate and other fees might be greater, which in turn makes the investment less profitable and less appealing. There are other avenues such as getting equity loans on the properties you have. However, you might still have to deal with other institutions as your primary source of repayment / personal income has suffered since you had to switch jobs.

I hope this has been of some help.
Let me know if I can help you further.
Author: Commercial Loan Underwriter