Posted on: 20th Jun, 2010 09:16 am
Long story, but all the information is required. I'll make it as short as possible.
We own a home on 5+ acres. All property around us is already zoned commercial; not all is currently built up, but this is happening fairly quickly. It's obvious to us that we need to move in the next few years, (1-5 is best guess) and now is a great time to buy a house... particularly in depressed Florida resort areas.
The county straightened the road in front of our property, moving the road slightly (generally less than the width of the old roadbed) away from out property. They gave the old roadbed in it's entirety to the property owner across the street, essentially confiscating 550 feet of frontage from us and replacing it with a 25 foot residential driveway easement, otherwise land-locking our property. This of course was illegal. We sued, and agreed settled for a contract from the county government that they will provide two, 100 foot wide, three lane commercially usable access drives to our property, one to each of the roads that make up the corner we are on. The specifications, location, and character of these must be approved by us, at our sole discretion, and the county pays us $10,000 per month until these are actually in place. (IE: We can't force them to build, but they can't force us to accept either. They pay until we accept.)
They have already paid for 2.5 years. It appears it will cost enough to build the access that they intend to wait until someone buys our property to aggregate it to one of the adjacent tracts for development. They will then work out some arrangement with the developer to make the payments go away. (The adjacent tracts already have access, but will need water, sewer, turn lanes, permits, etc. - plenty of negotiating room.) Yes, the contract is transferrable.
Our current mortgage is about 200k. Property appraises at about 320k residential, or 3.5 million commercial w/access in place. Other income (salary) is about 100k/yr, so total yearly income is about 220k/yr. No other debt. Credit score is about 800. This all seems clean, but...
We can't get a mortgage on another house!
Reasoning is that the income from the contract does not count as 'income' for mortgage purposes, since we cannot guarantee term. The existing property is currently used as residential, so that's the appraisal that must be used, and “future†commercial value is speculative and irrelevant. Thus, we can rely only on my 100k paycheck, and we must count against it the existing mortgage payments + any proposed payments. Nope, under those conditions, we can't qualify.
We own a home on 5+ acres. All property around us is already zoned commercial; not all is currently built up, but this is happening fairly quickly. It's obvious to us that we need to move in the next few years, (1-5 is best guess) and now is a great time to buy a house... particularly in depressed Florida resort areas.
The county straightened the road in front of our property, moving the road slightly (generally less than the width of the old roadbed) away from out property. They gave the old roadbed in it's entirety to the property owner across the street, essentially confiscating 550 feet of frontage from us and replacing it with a 25 foot residential driveway easement, otherwise land-locking our property. This of course was illegal. We sued, and agreed settled for a contract from the county government that they will provide two, 100 foot wide, three lane commercially usable access drives to our property, one to each of the roads that make up the corner we are on. The specifications, location, and character of these must be approved by us, at our sole discretion, and the county pays us $10,000 per month until these are actually in place. (IE: We can't force them to build, but they can't force us to accept either. They pay until we accept.)
They have already paid for 2.5 years. It appears it will cost enough to build the access that they intend to wait until someone buys our property to aggregate it to one of the adjacent tracts for development. They will then work out some arrangement with the developer to make the payments go away. (The adjacent tracts already have access, but will need water, sewer, turn lanes, permits, etc. - plenty of negotiating room.) Yes, the contract is transferrable.
Our current mortgage is about 200k. Property appraises at about 320k residential, or 3.5 million commercial w/access in place. Other income (salary) is about 100k/yr, so total yearly income is about 220k/yr. No other debt. Credit score is about 800. This all seems clean, but...
We can't get a mortgage on another house!
Reasoning is that the income from the contract does not count as 'income' for mortgage purposes, since we cannot guarantee term. The existing property is currently used as residential, so that's the appraisal that must be used, and “future†commercial value is speculative and irrelevant. Thus, we can rely only on my 100k paycheck, and we must count against it the existing mortgage payments + any proposed payments. Nope, under those conditions, we can't qualify.
Hi garycarroll,
It is true that as you cannot guarantee the income from the contract, it won't be considered as your income while you apply for a mortgage. Moreover, as you already have a mortgage on one of the your properties, the lenders won't be ready to give you a home to buy another residential property though you've a good credit score. You will have to sell off your present property and then apply for a home loan to buy a new home.
It is true that as you cannot guarantee the income from the contract, it won't be considered as your income while you apply for a mortgage. Moreover, as you already have a mortgage on one of the your properties, the lenders won't be ready to give you a home to buy another residential property though you've a good credit score. You will have to sell off your present property and then apply for a home loan to buy a new home.
"You will have to sell off your present property and then apply for a home loan to buy a new home."
Yes, that's what the bank told us. However, the property produces $8,500/month net positive cash flow, it seems a “Bad Ideaâ€(tm) to sell it right now. Impossible to get enough as residential, and selling commercial property in this market is likely to be disappointing. Even if we got enough for it to make it attractive, selling a primary residence for a capital gain in the millions has noxious tax consequences.
We were wondering about forming an LLC and transferring the property into the LLC as investment property (refinancing to convert the mortgage). This would mean we have no mortgage. Our only debt would then be in an LLC that has a net positive cash flow of $8,500/month. We can also rent the house for between 2 and 2.5k/month. I do not know whether net LLC income can count towards a mortgage, but even if it just cancels out we then have income of 100k, no debt, and excellent credit... maybe a mortgage is possible then?
I am hoping for such creative ideas.
The goals are to convert our curent property into investment property rather than primary residence (better tax options when it gets sold); move to a state with better tax treatment of income; and take advantage of the current excellent homebuying environment and mortgage rates.
We do NOT want to get one of the noxious mortgages that are the current “sub prime†substitutes. We don't HAVE to move, it just seems like we ought to be able to do so in an advantageous way. Now is a good time to buy, and we have the income and credit rating. As your signature reads, "Procrastination is the enemy of your financial success".
Yes, that's what the bank told us. However, the property produces $8,500/month net positive cash flow, it seems a “Bad Ideaâ€(tm) to sell it right now. Impossible to get enough as residential, and selling commercial property in this market is likely to be disappointing. Even if we got enough for it to make it attractive, selling a primary residence for a capital gain in the millions has noxious tax consequences.
We were wondering about forming an LLC and transferring the property into the LLC as investment property (refinancing to convert the mortgage). This would mean we have no mortgage. Our only debt would then be in an LLC that has a net positive cash flow of $8,500/month. We can also rent the house for between 2 and 2.5k/month. I do not know whether net LLC income can count towards a mortgage, but even if it just cancels out we then have income of 100k, no debt, and excellent credit... maybe a mortgage is possible then?
I am hoping for such creative ideas.
The goals are to convert our curent property into investment property rather than primary residence (better tax options when it gets sold); move to a state with better tax treatment of income; and take advantage of the current excellent homebuying environment and mortgage rates.
We do NOT want to get one of the noxious mortgages that are the current “sub prime†substitutes. We don't HAVE to move, it just seems like we ought to be able to do so in an advantageous way. Now is a good time to buy, and we have the income and credit rating. As your signature reads, "Procrastination is the enemy of your financial success".
Hi garycarroll!
Welcome to forums!
You can get the present property transferred to an LLC. However, if the property has a mortgage on it, then you will have to contact the lender and inform him about your intentions to transfer the property into an LLC. If the lender does not agree to it, then you won't be able to transfer the property into a LLC.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You can get the present property transferred to an LLC. However, if the property has a mortgage on it, then you will have to contact the lender and inform him about your intentions to transfer the property into an LLC. If the lender does not agree to it, then you won't be able to transfer the property into a LLC.
Feel free to ask if you've further queries.
Sussane