How to finance a cabin?

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I'm considering bidding on a cabin that is coming up for sale at an auction soon.  The total purchase price will be in the $100K-$120K range (if it's higher than that, I'm out).  The auction requires 10% down the day of the auction and then the balance within 30 days.  It sounds like there is a bit of wiggle room if it takes a few extra days to close, but not much otherwise.  I do not have $120K sitting around liquid, but I can get access to funds if needed.  I wanted to get everyone's collective thoughts about the ability to get a mortgage on a property like this, particularly in a short timespan like this.  I have about $100K equity in my house but I don't have a HELOC in place -- could I get one in 30 days?  I have ~$60K in paid off vehicles, so I assume I can refinance those relatively easily at Penfed/NFCU.  I have $30K liquid at the moment so I can make the down payment, along with some additional funds into the LTV if I could get a mortgage.  Credit card cash advance/BT are always an option, I have some pretty big lines open.  I haven't done any BTs in a while -- are banks still sending BT checks out?

The plan would be to close and then likely refinance this into a small mortgage to pay off anything I borrow, or just pay off the entire thing when I sell my primary residence in the next 12 months, or at bonus time.  Anyone have thoughts on this, angles I'm missing? 

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Using your primary residence as a ATM for a cabin, great idea cannot lose....  Cabins will cost a lot in upkeep, insuran... (more)

DamnoIT (Jul. 28, 2016 @ 11:20a) |

What's your logic there, if I may? Not disputing, just want to understand how you came up with that.

jaytrader (Jul. 28, 2016 @ 11:57a) |

As I said previously, I didn't end up winning it, so it's kind of a moot point.  But I'm not sure I agree with your figu... (more)

ltcm (Jul. 28, 2016 @ 12:45p) |

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wow i hope that cabin is worth it.
And when you say Cabin? Does it have running water / power? If not, then why are you paying 100k for a tree house? IF it does, then most mortgage lenders will touch it right?

Do you have money in your 401k that you could get a loan from? Could give you up to 50k more as a short term bridge loan.

pics of cabin

I think it's definitely worth $100K, likely even a bit more. I'm sort of hoping I get a deal buying it at the auction. If I don't, I'll move on. I've been casually looking for a while but I'm not emotionally invested in this being the only cabin out there. It's only being sold in person, no online or proxy bids.

It's in a desirable location ~25 minutes from a very nice ski resort in Colorado (~10 minutes from a less nice ski area). Lots of outdoor activities, it does have electricity, heat, running water. It's a small house, ~650 square feet, but also has a small garage/storage building on 1/4 acre treed lot. It's definitely worth it and will be a great getaway for the family (~2 hours from Denver). Lack of recent comps in the immediate area, but I think I've got a good sense of the value. It was built ~60 years ago so it needs a bit of updating, but nothing major. It is being sold furnished (which is the custom around here mostly).

jerosen said:   Do you have money in your 401k that you could get a loan from? Could give you up to 50k more as a short term bridge loan.
  
Also a good idea, thanks.

op maybe tell us how your cabin does not qualify as a house


ltcm said:   Anyone have thoughts on this, angles I'm missing? 
 

well...have you bought as-is, distressed, uninspected property like this before? there are some big risks, and you need to know WTF you're doing, especially with rural stuff in CO where you can have huge costs associated with establishing (or remediating!) water/sewerage facilities.

i wonder how you have such a good idea of the value when like you said, virtually no comps? unless you're a tested local RE investor and you can reliably draw inferences from market conditions...which frankly, given that you don't have much cash on hand and you want to finance an auction property, i'm guessing that's not the case.

rufflesinc said:   op maybe tell us how your cabin does not qualify as a house
  
It does.  I'm just trying to brainstorm solutions in case a traditional mortgage is not available for some reason.  I think of it as a "cabin," but it is most definitely a small house.

solarUS said:   
ltcm said:   Anyone have thoughts on this, angles I'm missing? 
well...have you bought as-is, distressed, uninspected property like this before? there are some big risks, and you need to know WTF you're doing, especially with rural stuff in CO where you can have huge costs associated with establishing (or remediating!) water/sewerage facilities.

i wonder how you have such a good idea of the value when like you said, virtually no comps? unless you're a tested local RE investor and you can reliably draw inferences from market conditions...which frankly, given that you don't have much cash on hand and you want to finance an auction property, i'm guessing that's not the case.

  
Fair enough, but everyone has to start somewhere.  If this somehow went really south it wouldn't be the end of the world.  It would suck, but it wouldn't ruin me.  But honestly, it appears to be in good condition, I am familiar with the location (having rented in this early numerous times) and the land is probably worth 60% of the value by itself. 


Great weed in Colorado apparently

P2P loans from Prosper or Lending Club is another option if you have good credit. Certainly better than a cash advance on a CC.

Am I the only one that thinks if OP doesn't have the cash he shouldn't be bidding? Who hasn't dreamed about buying a getaway place at the beach or mountains, but the few that actually do, find out that they hardly ever have the time to go there and it turns into a money pit.

I don't think there's anything wrong with financing a vacation property, I think OP is smart to be wary that it very likely won't get a mortgage closed in 30 days. I hear many lenders are very backed up, appraisals can take forever in some places. Rural areas seem like they'd be especially bad, and I know real estate in general in Colorado is pretty hot. Check out the sticky mortgage thread here, lots of recent discussion about expiring locks.

So I agree you should arrange to be able to close with cash before bidding. HELOC, car loans, 401k loan all sound like smart options to hop on right away.

My suggestion is a HELOC on your current property.

ltcm said:   
rufflesinc said:   op maybe tell us how your cabin does not qualify as a house
  
It does.  I'm just trying to brainstorm solutions in case a traditional mortgage is not available for some reason.  I think of it as a "cabin," but it is most definitely a small house.

  That's how it works? Wow, my 2003 Impala is now a Porsche Boxster. It's that easy!

Use connections to find out who the best , seasoned real estate agent is. Ask if you can take them to an EXPENSIVE lunch or certificate for a NICE dinner. Your questions include an ability to fund, companies that might loan when you re-fi and possibly information regarding the cabin. If you have any real estate friends they might be able to look up who is actually selling houses/cabins in that area. You could also state that you are casually looking for a cabin in the area if this does not work out? Not sure how to ask for help from a real estate person without misleading them about your intentions Perhaps there is a real estate person that can chime in?

Californiadeal said:   Use connections to find out who the best , seasoned real estate agent is. Ask if you can take them to an EXPENSIVE lunch or certificate for a NICE dinner. Your questions include an ability to fund, companies that might loan when you re-fi and possibly information regarding the cabin. If you have any real estate friends they might be able to look up who is actually selling houses/cabins in that area. You could also state that you are casually looking for a cabin in the area if this does not work out? Not sure how to ask for help from a real estate person without misleading them about your intentions Perhaps there is a real estate person that can chime in?
What's wrong with that?  Afraid to sink to their level and get dirty with them?

DTASFAB said:   
Californiadeal said:   Use connections to find out who the best , seasoned real estate agent is. Ask if you can take them to an EXPENSIVE lunch or certificate for a NICE dinner. Your questions include an ability to fund, companies that might loan when you re-fi and possibly information regarding the cabin. If you have any real estate friends they might be able to look up who is actually selling houses/cabins in that area. You could also state that you are casually looking for a cabin in the area if this does not work out? Not sure how to ask for help from a real estate person without misleading them about your intentions Perhaps there is a real estate person that can chime in?
What's wrong with that?  Afraid to sink to their level and get dirty with them?

Just ask. Unless the person you are talking to is a complete turd he/she will gladly help you. I've helped countless people and didn't make a dime off of them. It's part of the business.

Cherish the cabin..

saladdin said:   
ltcm said:   
rufflesinc said:   op maybe tell us how your cabin does not qualify as a house
  
It does.  I'm just trying to brainstorm solutions in case a traditional mortgage is not available for some reason.  I think of it as a "cabin," but it is most definitely a small house.

  That's how it works? Wow, my 2003 Impala is now a Porsche Boxster. It's that easy!

  You can call it the batmobile for all anyone cares.

My point was that it might be a little insensitive to "act" like a buyer and waste the real estate agents time VS being upfront

Californiadeal said:   My point was that it might be a little insensitive to "act" like a buyer and waste the real estate agents time VS being upfront
  Be upfront. Tell the agent you are considering buying a cabin, and are exploring a number of options including the auction. Nothing wrong with that.

I think OP that while the prospect of owning a vacation property makes us all feel empowered and successful, you owe yourself and your family the following analysis: 

- Do you really feel that owning the place you go for a vacation will make everyone in your family happy for -not your kids' respective childhoods-, but decades?  
- Do you maintain your current home in spotless, manicured, perfection at all times?  If your honest answer to this is "not quite", then have you considered the cost in money, time, and no-choice travel to maintain TWO homes? 
- Are you good with setting your vacation destination to a single location for almost every free weekend away, and most vacations for the next 15-20 years?
- Do you intend to remain in Colorado for the rest of your career?  

- Finally(these #s are guesses, but I'll bet conservative):
        - Annual cost to tie up $100,000 using debt: ~$6,000+/-
        - Annual tax bill: ~$2,500 ?
        - Annual Insurance:  ~$800 ?
        - Annual non-discretionary maintenance: $600 ?
        - Money you'll spend that isn't 100% required, but want to for your cabin: $1,000 ?

The above items, and I am sure I have forgotten one or two items of significance (utilities for instance), total $10,900 a year in must-pay costs top you.  You might be able to curtail one or two by a bit in a crisis, but not by much.  Your short-term flexibility will be near zero unless your income skyrockets, you inherit real money, or you win the lottery.  

How many nice vacation spots are available to you to rent anytime/anywhere you want, -and more importantly can decide NOT to rent, for $10K a year?  

Some people decide "Damn the torpedoes" and go ahead anyway, but you should think this through before you tie up your finances in this way for a very-long time.

Good discussion guys, I appreciate the input, even if I don't agree with all of it. I have thought through a lot of the things mentioned and have decided that for my specific family situation, career situation, etc... it did make sense. I've been thinking about buying a cabin for ~5 years and specifically bought less house when I bought a primary residence a few years ago so that I could buy a cabin in a few years.

I didn't have $100K liquid at the moment but that doesn't mean I couldn't afford it. I've been paying off big student loans the last few years rather than saving, so the cabin would have been ~1/3 of my annual income (total cost). I think I can afford it and would have had it paid off in short order, it was more about how to get the money together quickly. I really liked this cabin a lot and they don't come up often in this price range. There were ~10 cabins within a 10-mile area that had been sold in the last 2.5 years and the average was ~$140/square foot. This cabin was 650 square feet, so ~$90K. But it had a garage and easy access to the Colorado River (~500 feet away), etc... so I think a bid of $100K-$120K was reasonable.

I went into the auction with a top end of $110K. I went to $111K just to see if I could knock out the other bidders and then backed out. The final sales price was $112K, but I think they would have kept going for a while so I think I would have needed to go significantly above my budget to win. It was a good experience and I enjoyed going to view the cabin a lot. My family had a good day in the mountains and it just solidified that we would like to have a place in this area. We'll keep looking, we'll find one.

Here's the cabin for anyone interested: http://www.estately.com/listings/info/474-grand-county-road-620

I don't get it.

pretty sure that's a cabin

ltcm said:   Good discussion guys, I appreciate the input, even if I don't agree with all of it. I have thought through a lot of the things mentioned and have decided that for my specific family situation, career situation, etc... it did make sense. I've been thinking about buying a cabin for ~5 years and specifically bought less house when I bought a primary residence a few years ago so that I could buy a cabin in a few years.

I didn't have $100K liquid at the moment but that doesn't mean I couldn't afford it. I've been paying off big student loans the last few years rather than saving, so the cabin would have been ~1/3 of my annual income (total cost). I think I can afford it and would have had it paid off in short order, it was more about how to get the money together quickly. I really liked this cabin a lot and they don't come up often in this price range. There were ~10 cabins within a 10-mile area that had been sold in the last 2.5 years and the average was ~$140/square foot. This cabin was 650 square feet, so ~$90K. But it had a garage and easy access to the Colorado River (~500 feet away), etc... so I think a bid of $100K-$120K was reasonable.

I went into the auction with a top end of $110K. I went to $111K just to see if I could knock out the other bidders and then backed out. The final sales price was $112K, but I think they would have kept going for a while so I think I would have needed to go significantly above my budget to win. It was a good experience and I enjoyed going to view the cabin a lot. My family had a good day in the mountains and it just solidified that we would like to have a place in this area. We'll keep looking, we'll find one.

Here's the cabin for anyone interested: http://www.estately.com/listings/info/474-grand-county-road-620

  Doesn't it get cold there in the winter???  Brrrrrrrrr

The place was worth double that, based solely on the mint condition of the 70s/80s furniture and decor!

Nice place, but as I mentioned above - lotsa 'deferred maintenance" visible there.  You'd spend a lot of time and / or money to keep your investment up. I went through the same analysis on an "Up North" cabin in Michigan about 10 years ago, and concluded that the maintenance burden alone would probably kill me.  Good thing, as 2008/9 was just around the corner....

ltcm said:   
jerosen said:   Do you have money in your 401k that you could get a loan from? Could give you up to 50k more as a short term bridge loan.
  
Also a good idea, thanks.

  We did this for our condo purchase last year. Worked out great! I happened to leave my job early this year, so I actually ended up paying it off early (was going to be paid off in the July/August time frame). Point is: just be careful with regard to any possibilities of being terminated or leaving your current job.

Using your primary residence as a ATM for a cabin, great idea cannot lose....  Cabins will cost a lot in upkeep, insurance, util, taxes ect...  Are you going to rent it out our will you just have it for fun?  If for fun what is your current net worth?  A personal vacation property at 100-120k level makes sense if you have around a million sitting around.

DamnoIT said:    A personal vacation property at 100-120k level makes sense if you have around a million sitting around.
  What's your logic there, if I may? Not disputing, just want to understand how you came up with that.

DamnoIT said:   Using your primary residence as a ATM for a cabin, great idea cannot lose....  Cabins will cost a lot in upkeep, insurance, util, taxes ect...  Are you going to rent it out our will you just have it for fun?  If for fun what is your current net worth?  A personal vacation property at 100-120k level makes sense if you have around a million sitting around.
  
As I said previously, I didn't end up winning it, so it's kind of a moot point.  But I'm not sure I agree with your figures.  Again, as with anything, it's probably all about balance.  Some people think anyone who drives a car worth more than $2K (MOR CROWN VIC PLZ) is ridiculous.  As I mentioned above, my personal residence was less than 1X my annual income and my personal residence plus the cabin price would have been just over 1X my annual income.  If someone told you that they intended to buy 1 residence for just over 1X annual income, I don't think anyone would think it was out of line, so I'm not sure why splitting that purchase over 2 residences is that big of a deal.  Yes, it will have marginally higher utilities, etc... but it doesn't seem crazy. 



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