Posted by Steve T on March 19, 2001 at 22:19:08:
I’m not saying its too much profit, but too much profit as in too good to be true, or not feasible. I’ll certainly take as much as I can get.
Hard money loans and rehabs - Posted by Steve T.
Posted by Steve T. on March 19, 2001 at 10:52:26:
I’ve just checked out my first property, met with a contractor,and wrote up a scope of work. I haven’t bought the property yet or even submitted a bid. When I talked to a hard money lender, he said to keep the renovation, purchase price, and closing costs below 60%. How feasible is this? Do some lenders offer cash for the renovation on top of the 65% LTV? This deal won’t be under 60% I guarantee it. To be more specfic… the property could go for 100k fixed up, the asking price is 69k. I can’t see the renovations being less than 15k.Even though I’ll bid lower, i’ll still go over 60% total costs. Is this a normal cost breakdown or should I go to the next deal. 60% just seems ridiculously low to me… 35% profit seems high. Thanks for the advice in advance.
To much profit??? - Posted by SCook85
Posted by SCook85 on March 19, 2001 at 16:34:06:
In addition to what Jim wrote, what is to much profit? If you feel that 35% is to much profit you are limiting yourself. Are you going to sell a $100k home for $85k because you are only into it for $60k and you don’t want to make too much?
Is there really such a thing as too much profit? (This is providedt that everything is on the up and up).
Steve
Re: Hard money loans and rehabs - Posted by JPiper
Posted by JPiper on March 19, 2001 at 12:11:05:
If “35% profit seems high” to you…it’s because it probably is. You’ve left out any of a number of possible costs.
For example…realtor fee. This $6000-$7000 fee may well be necessary in a slow market where you’re trying to cash out. The MLS gives your property maximum exposure.
Carrying costs…6 months at a hard money type rate of 15% could be another $4500 at your price level.
Points…this could easily be another $3K+.
Advertising and marketing. Plug your own number in here. Advertising is not cheap.
How about cost overruns? This one is almost ALWAYS in the equation. Think you need some room to compensate?
FMV is not an exact number? Do you think anyone ever lowered a price to sell a property? Pay the buyer’s closing costs?
Here’s the point…hard money lenders are probably going to be in the 50% to 65-70% type of range (LTV). The reason is that they know where they have to be to be safe.
You would be well advised to consider all this inasmuch as you have yet to do a deal. It could be that you don’t yet know what you don’t know. And by the way, perhaps the hard money lender will offer you a better deal once he is confident that you can do what you think you can do.
JPiper