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Thread: Buying my first house need advice

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    Default Buying my first house need advice

    Hi,
    I'm in the process of buying my first house. The seller is a friend and bought the property years ago and it has since then dropped majorly in value. The seller doesnt want to take on the high mortgage payments on property that's decreased so much, and he's trying to help me out so that's why he's selling it to me. It's a studio apartment and was bought at around 120k. We appraised it and it was valued at about 80,000 (nothing is updated and very old bthrm/kitchen. He's agreed to sell it to me for 60k. I'm just getting a little confused because it is a friendly sale so of course we're not going through proper procedure. I think this is a great opportunity because i don't have any credit and have been in the industry for all my working career. I just don't want to get fucked in any way. My goal is to buy this house, fix it up then buy another house and rent this one out. We are working out some paper work but by the time the sale will be ready, im in a position where i can buy the studio in cash in full but that'll be my whole bankroll. I'm not too worried about future incoming cash flow. My question is, should i do it and use my whole savings. i'm looking at it as an investment in the long run. I can pay it off immediately or shortly and start collecting revenue on it. If i pay it off in full i'm thinking ill have equity behind me, always have a place to live, and have no debt or mortgages on my credit. I'm also thinking i can proposition him the full cash lump sum into an even more discounted price, say 10,000 off? He's in need of cash. I don't know if this is the smarter thing to do in this economy, or whether i should offer a hefty down payment and have very low mortgage payments which will mean i will have a more comfortable cushion behind me in case of emergencies. Sorry this is so scatterbrained, its just hard to ask people for advice when you're in this industry. I want to hurry up and close this deal before anything goes wrong but feel like i cant expedite the process because i'm just not informed enough but as soon as i know 100% in which direction i should go i will be nagging at him to get these papers signed.

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    Default Re: Buying my first house need advice

    First, go hire a local real estate lawyer to advise you. Home sales are not so easy and you don't want to end up paying and the seller not being able to deliver a deed free and clear of the existing mortgage.

    Second, get a title opinion, and what is called an owner's title insurance policy.

    Third, this is most likely a short sale, so be careful!

    Fourth, fix and flip is not very likely in this market, so be prepared to live in this place for a while or if you don't want to live there, make sure its rental value is high enough to cover the mortgage, taxes, extra-expensive homeowners insurance because it's a rental, repairs and enough profit for you to justify the investment.

    XOXO
    Z

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    Default Re: Buying my first house need advice

    Hi. I would take out a mortgage to establish credit for yourself. You may have some trouble getting a mortgage on such a small amount. I got a shitty interest rate IMO when I bought my house 3 years ago (6.5). After owning for only one year I was able to refinance to a 4.3! Having a mortgage has really helped me establish credit.

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    Default Re: Buying my first house need advice

    go hire a local real estate lawyer to advise you. Home sales are not so easy and you don't want to end up paying and the seller not being able to deliver a deed free and clear of the existing mortgage.
    This is a KEY issue where the 'private' sale of real estate is concerned. Even though the seller may be a 'friend', it's vital that you protect your own interests by obtaining clear title to the property.


    I would take out a mortgage to establish credit for yourself. You may have some trouble getting a mortgage on such a small amount.
    for better or worse, the recently enacted tighter regulations on ( mortgage ) lenders now makes it extremely difficult for exotic dancers to obtain mortgages. First there is the hurdle of income verification ... which now essentially requires producing several years worth of tax returns. Next is the 'stress test' ... which complicates life for dancers since the banks now must take into consideration that a broken ankle or a club bust could immediately reduce the dancer's income to zero, without being eligible for unemployment benefits.

    Even if a new mortgage was to be approved, there are still a ton of additional costs that will come with said new mortgage - from closing costs to appraisal fees to 'testing' / inspection fees etc. Some of these are going to be required in any case as a condition of the real estate deed transfer, but some are mandated by the mortgage lender and could be avoided via a 'cash deal'.

    Providing that obtaining a clear title isn't a problem, IMHO your 'low-ball' offer for a 'cash deal' sounds like the least of the evils. This will still involve attorney's fees and some mandatory 'testing' / inspection fees. But right now there isn't really any good place to 'park' excess cash that will deliver risk free interest earnings as an alternative to 'investing' in an outright purchase of a property.

    Agreed that a quick fix and flip isn't going to happen ... meaning that buying this property will put you in the 'landlord' business for as far as the eye can see !!! But as the wheels of foreclosure again pick up speed on 'deadbeat' homeowners, demand for rental properties is only going to increase !

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    Default Re: Buying my first house need advice

    I will definitely be looking into a real estate lawyer now, thank you.
    I've considered getting a mortgage that i will be more than comfortable handling in order to build my credit. I just don't know if i'll be approved for anything. My taxes are not in order but I am working on fixing them and owing all the fees so past tax reports are not in my favor lol. =X I messed up. But im coming down from lalaland and realizing this renegade life style of living off the grid and getting undocumented cash in big material amounts has made it so much harder for me to do anything now.
    Going with the full cash payment sounds the easiest, but ill still have to build credit. I definitely need to do more research but thank you

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    Default Re: Buying my first house need advice

    Lots of great advice here. Some 2c from a pa investor

    Get title insurance....$600 or so now, saves big later

    FIND OUT WHERE THE BANK SITS. If he owes on it, your 60 will go to the bank, who needs to approve the short sale. Make sure you own it then, and they sign off. For your 60, you want a CLEAR TITLE

    I AM NOT INTERESTED IN PAYING INTEREST. 30 yr mortgage at 4.5%, means you will pay 120% of the purchase price (4%*30, adjusted for compounding and payoff) over the life of the loan

    To build credit and reduce interest, I suggest go to a local bank, arrange a line of credit on the house, pay cash for the house. Draw off the line, then pay it back. Do this often over the years in increasing amounts. Use this to build credit and a relationship w a local banker. You'll need it down the road. Choose a LOCAL bank, where the owner/president is in your area. You want someone that knows your market and how local dreams work...not someone reporting to a wall st management firm

    Start out now auditioning handypeople. Most will wash out, some will make u cry. Eventually you'll find one

    PM me for anything u want to know. I grew to 21 units, then started buying at tax sale

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    Default Re: Buying my first house need advice

    My taxes are not in order but I am working on fixing them and owing all the fees so past tax reports are not in my favor lol. =X I messed up. But im coming down from lalaland and realizing this renegade life style of living off the grid and getting undocumented cash in big material amounts has made it so much harder for me to do anything now.
    Going with the full cash payment sounds the easiest
    I should probably make you aware that the IRS has automatic reporting mechanisms in place with all state title registry agencies. Thus as soon as you purchase this house ( or a new car, or anything else involving a title ) the IRS is going to receive an automatic report that person X with social security number Y just spent Z dollars.

    IRS computers are then going to try to match past tax returns from person X with social security number Y to see if enough past income has been reported ( and taxes paid ) to explain where the Z dollars came from. If there is a major discrepancy, it's very probable that the IRS will start making additional inquiries i.e. personal bank account deposit history, credit card transactions etc. to try and establish a pattern of undocumented / unreported income funding regular deposits / expenditures.

    This happened to a dancer acquaintance who had been 'living off the grid' but eventually decided to purchase a fairly expensive new car. She eventually 'settled' with the IRS for something like $60,000 in unpaid income taxes for the previous three years worth of previously unreported income plus penalties plus interest ... and wound up 'losing' her new car in the process.

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    Default Re: Buying my first house need advice

    yeah i know, the ironic thing is that i'm an accounting major so i'm very familiar with the tax law and the repercussions. I thought i was a bad ass and could beat the system LOL and maybe i could have if i wanted to be a squatter with nothing to my name all my life. It's just a rude awakening when you realize how hard it is to reach stability and success even if you're making a lot of money. Thanks for all the advice....will update when have more info

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    Default Re: Buying my first house need advice

    Quote Originally Posted by Melonie View Post
    I should probably make you aware that the IRS has automatic reporting mechanisms in place with all state title registry agencies. Thus as soon as you purchase this house ( or a new car, or anything else involving a title ) the IRS is going to receive an automatic report that person X with social security number Y just spent Z dollars.
    Deeds do not have social security numbers attached to them.

    Z

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    Default Re: Buying my first house need advice

    ^^^ but title transfer / property tax paperwork does. If your implication was that that a cash sale of a property without the involvement of a mortgage lender or real estate agent is somehow going to avoid IRS / state tax agency 'radar', I definitely wouldn't 'bet the house' on it. And given the OP's present tax situation, that could turn out to literally be the case !!!

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    Default Re: Buying my first house need advice

    Quote Originally Posted by Melonie View Post
    ^^^ but title transfer / property tax paperwork does.
    No it does not.

    If your implication was that that a cash sale of a property without the involvement of a mortgage lender or real estate agent is somehow going to avoid IRS / state tax agency 'radar', I definitely wouldn't 'bet the house' on it. And given the OP's present tax situation, that could turn out to literally be the case !!!
    Nope, just pointing out that you continue to make things up.

    Z

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    Default Re: Buying my first house need advice

    ^^^ it certainly does in New York, New Jersey etc. where the SS# is right in the top block of the state property tax registration form next to name and address of the property buyer. I obviously can't speak for NC.

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    Default Re: Buying my first house need advice

    Quote Originally Posted by Melonie View Post
    ^^^ it certainly does in New York, New Jersey etc. where the SS# is right in the top block of the state property tax registration form next to name and address of the property buyer. I obviously can't speak for NC.
    It's on the property tax return. States that charge a tax independent of recording may do that. States that collect the tax on recording don't use the social security number.

    Z

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    Default Re: Buying my first house need advice

    Open a delaware corp, have that "blind" (delaware almost never divulges corporate owners names). Corp buy the house. May not solve the issue, but puts one more layer in place

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    Default Re: Buying my first house need advice

    Quote Originally Posted by pinups4 View Post
    Open a delaware corp, have that "blind" (delaware almost never divulges corporate owners names). Corp buy the house. May not solve the issue, but puts one more layer in place
    Almost every state corporations law works that way. The registered agent has to be divulged, and officers at the time of incorporation are divulged, but not much information on current shareholders. Of course you can hire a registered agent service company to be your registered agent. Most companies do so.

    Z

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