financing using VTB

[mandmholdings]

I have spoken to my bank and I can get this property with 20% down. There is a strong possibility that I can get the seller to do a VTB for 10%. Would this mean that the bank would only require me to put the remaining 10% down to purchase the property? If so, would I have to pay CMHC fees? Any help would be appreciated. Thanks.
Travis

 

[Thomas Beyer]

QUOTE (mandmholdings @ Sep 14 2008, 02:51 PM) I have spoken to my bank and I can get this property with 20% down. There is a strong possibility that I can get the seller to do a VTB for 10%. Would this mean that the bank would only require me to put the remaining 10% down to purchase the property? If so, would I have to pay CMHC fees? Any help would be appreciated. Thanks.
Travis
no, no CMHC fees as the 1st mortgage is only 80%.

HOWEVER, the bank (who will have the 1st mortgage) has to approve it .. and may or may not ! They will usually approve it if the income is strong enough.

Consider turning the 10% VTB into a non mortgage JV, .. perhaps with the option to add a caveat later. This would be easier for the bank to swallow !

 

[mandmholdings]

QUOTE (thomasbeyer2000 @ Sep 14 2008, 04:22 PM) no, no CMHC fees as the 1st mortgage is only 80%.

HOWEVER, the bank (who will have the 1st mortgage) has to approve it .. and may or may not ! They will usually approve it if the income is strong enough.

Consider turning the 10% VTB into a non mortgage JV, .. perhaps with the option to add a caveat later. This would be easier for the bank to swallow !

Thanks. That was the other option I was exploring. I think I will do that.

 

[MarkTorgerson]

QUOTE (mandmholdings @ Sep 14 2008, 07:52 PM) Thanks. That was the other option I was exploring. I think I will do that.


I am in a similar situation. How would a 10% VTB be changed to a non mortgage JV? For math purposes let`s say the building was worth 1 million. I would like to do up the same kind of offer but this structure is unfamiliar to me. How would the caveat be stated?

Thanks
Mark

 

[mandmholdings]

QUOTE (MarkTorgerson @ Sep 15 2008, 03:30 PM) I am in a similar situation. How w
ould a 10% VTB be changed to a non mortgage JV? For math purposes let`s say the building was worth 1 million. I would like to do up the same kind of offer but this structure is unfamiliar to me. How would the caveat be stated?

Thanks
Mark

This is my first time trying to put a deal like this but my thinking is front the cash to buy the property. As part of the negotiations have the seller agree to invest X amount back into you/your company etc. This agreement could look a number of different ways...give up a percentage of profits at appointed time in the future...give them guarenteed percentage return on their money...the details can vary quite a bit. I think the big thing is to find out what motivates the seller and negotiate based on that. A "risk averse" person would probably prefer a guarenteed return at a percentage. This is good because it`s not hard to beat gic`s etc. A person who understands property might be more motivated to do a profit sharing formula. Either way an agreement can be drawn up and a caveat can be registered on the property. Hope that helps.
Travis

 

[Thomas Beyer]

QUOTE (MarkTorgerson @ Sep 15 2008, 03:30 PM) I am in a similar situation. How would a 10% VTB be changed to a non mortgage JV? For math purposes let`s say the building was worth 1 million. I would like to do up the same kind of offer but this structure is unfamiliar to me. How would the caveat be stated?

Thanks
Mark
you need to have the seller sign a JV agreement that is agreeable to you and him/her. He/she then protects his interest via a caveat. The term could be the same as a VTB, but it is not a mortgage. It is a JV.

REIN will teach you how this is done .. if you`re patient enough. Not all knowledge happens in one 2 day weekend event !

 

[MarkTorgerson]

QUOTE (thomasbeyer2000 @ Sep 15 2008, 07:40 PM) you need to have the seller sign a JV agreement that is agreeable to you and him/her. He/she then protects his interest via a caveat. The term could be the same as a VTB, but it is not a mortgage. It is a JV.

REIN will teach you how this is done .. if you`re patient enough. Not all knowledge happens in one 2 day weekend event !


Thanks for the input everyone. I am indeed a REIN member and have several properties already but this is a new area for me. Thomas, could you give a quick example of how one of these offers would be written into a contract as if you were writing it? Let`s just say the seller would be OK with 10% interest only paid monthly. Do you need to come up with the full amount of bank required cash and then have the seller lend funds back to you?

Thanks again
Mark