Financing rehab purchase - Posted by Redline


#1

Posted by Yianni on November 01, 1998 at 17:49:46:

Hi Jeff,
If the info is more than the scenario where the owner carries a second with a ballon payoff clause, I would appreciate to have some more info on the subject. Thanks in advance.
Yianni


#2

Financing rehab purchase - Posted by Redline

Posted by Redline on October 28, 1998 at 12:38:02:

I am going to look at a property tonight that I’m considering purchasing to rehab and flip.

Asking price is $150,000, it needs work but it doesn’t look too bad. If I can pick it up for $120,000, spend =< $20,000 on it - I believe it will sell for $180,000 fast.

Aside from owner financing or all cash, how could I finance this? Would a 203K loan be feasible for an investor? How about hard money?

I’m thinking it would take me about 2 months to rehab (since I will be doing it mostly myself part-time) and there appears to be enough to carry the property through rehab and I believe the $180,000 would be a fast-selling price on the house once I was done.

Thanks in advance,
RL


#3

Re: Financing rehab purchase - Posted by Mike.R(NJ)

Posted by Mike.R(NJ) on October 28, 1998 at 17:40:12:

The 203K program is no longer available to investors.


#4

Re: Financing rehab purchase - Posted by Darren (MA)

Posted by Darren (MA) on October 28, 1998 at 14:07:34:

I’ve heard that it can be really difficult to get money for rehabs from conventional lenders. (I guess it would depend on how much work the place needed). However, I just got a conventional mortgage without any problems for a rehab I recently did. The interest rate was 8.25 for a 30 yr. fixed, 10% down, and they required I pay 1 point. It worked out really well for me.

You may want to read BUY IT, FIX IT, SELL IT, PROFIT from Kevin C. Myers. I actually read it AFTER my rehab project and I found it to be really good and really relevant to what I had just done. Now that I’ve read it, there are some things I would probably have done a little different. He talks about various means of obtaining money for rehabs in his book. Best of luck.

Darren


#5

What are you gonna do next? - Posted by Carey_PA

Posted by Carey_PA on October 28, 1998 at 16:39:02:

Darren,

Please forgive my question, because I know you’re probably gonna think it’s stupid, but I myself just finished reading Kevin’s book and I was wondering if I was missing something, because he doesn’t really go into getting a rehab project financed through the conventional way like you did, i.e. 8.25% fixed 30 yrs, 1 point, and 10% down, but he talks about private mortgage lenders where you would pay interest only and then a balloon payment is due whenever.

I probably sounded like I just babbled on, but I’m confused as to why you would get a 30 yr. mortgage when your only going to have the house for 2 months, or so? Please explain this to me. BTW, did you have the CASH for you 10% down?

Thanks for your time,

CAREY


#6

Re: What are you gonna do next? - Posted by Darren (MA)

Posted by Darren (MA) on October 29, 1998 at 06:44:05:

Carey,

When I decided to do this rehab project I wasn’t really aware of private lenders. (This was my first rehab). In the past, I’ve always invested in multi’s so I was really only familiar with conventional lending, so that’s the route I took. It doesn’t really make a difference whether the mortgage is for 30 years or 8 months, since it’s getting paid off in about 3 months from the date acquired. To tell you the truth, I would probably inquire about private lending the next time around, but I would think that there would be higher up front costs for the use of their money. (I could be wrong on this, this is something I’ll find out next time around).

I think the reason Kevin Myers suggested private lenders is because of the resistence conventional lenders have displayed in the past toward loaning for rehabs. And, more importantly, was that you could borrow money based on the value AFTER it was fixed up. Now THAT, would be helpful, but in my particular case it didn’t make too much of a difference because I had the cash for a down payment as well as the fix-up costs. (Which I didn’t mind using since it was for such a short term). So had I gone the private route, I would have paid more up front for the use of their money in terms of rehab funds. Funds that I didn’t necessarily need. Does this make any sense to you? Drop me an e-mail if this is unclear, and I’ll try to explain it better.

Darren


#7

Private financing … - Posted by Redline

Posted by Redline on October 29, 1998 at 09:23:56:

When you are talking about “private money” - are you talking about just owner-financing or is there more to the story?


#8

Re: Private financing … - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on October 30, 1998 at 10:07:40:

There’s lots of money available from private individuals to fund your real estate deals, if you satisfy their 2 main objectives: 1) security, 2) yield, or return on investment.

Give them what they want by offering 50-60% LTV loans with 14-15% interest, and they’ll love to do business with you. (look up the “cash in your pocket plus cash flow” article in Money making ideas section of this web site to see how to advertise for these private lenders.

In your case you could offer your seller $70K cash now (1-st mortgage from a private lender) and 50K cash when you sell the house(secured by 2nd mortgage on the house). No payments, no interest on the seller carry note. Your monthly carrying costs are about the same this way as compared to $120K at 8% conventional. But your upfront costs are guaranteed to be lower if you are doing business with a private party directly, not via a mortgage broker.


#9

Re: Private financing … - Posted by Darren (MA)

Posted by Darren (MA) on October 29, 1998 at 09:35:28:

Redline,

Private money is money that is put up by individual real estate investors or investment groups who are interesting in putting their money into something short term that yields a relatively good return. They generally are more understanding of the project than a typical mortgage lender. Kevin Myers explains the various ways of finding these lenders. Eg. by speaking to your accountant, lawyers, etc.

As I mentioned, I’ve never dealt with a private lender, but there are literally thousands that have and it’s done everyday in every market. I believe it is a very viable resource for those that are seeking these type funds.

Darren


#10

Re: Private financing … - Posted by Redline

Posted by Redline on October 30, 1998 at 21:29:01:

Thanks alot Alex - I will look into this!

RL


#11

Financing? Ed Garcia? - Posted by Redline

Posted by Redline on October 29, 1998 at 12:14:55:

Interesting - I will look into this. Does anyone else have any ideas as to financing a possible rehab?


#12

Re: Financing? Ed Garcia? - Posted by Jeff

Posted by Jeff on October 30, 1998 at 08:22:47:

You can contact me about a financing program where the owner will take back a small second mortgage but get plenty of his money up front. It will allow for rehab funding up to 10% of the appraised value. It also has really easy qualifying requirements; i.e. no debt to income ratios or minimum income requirements, and there are no restrictions on the down payment sources or seasonings except that it can’t come from the seller. For SFR and 2-4 unit multifamily properties it can be non-owner occupied also.


#13

Re: Financing? Ed Garcia? - Posted by Redline

Posted by Redline on October 30, 1998 at 21:35:34:

Sounds interesting - I would like to know more.


#14

Re: Financing? Ed Garcia? - Posted by Jeff

Posted by Jeff on October 30, 1998 at 22:29:26:

I’m emailing some more info to you now.