Is this a good offer to investors? - Posted by Don

Posted by John Corey on June 18, 2006 at 11:55:16:


On the surface this could be a fine deal if you want to hold as a rental. The cash flow looks good. If you assume 75% of the gross rent for the mortgage payment you can cover a decent payment. Hence the value is lower than the income implies.

Hard money can be a very local business. Posting the state will help attract specific investors. Chelsea Private Equity provides hard money so just reply to my email and we can go over the terms.

If you look at the price vs. the repairs the extreme has you putting 50% of the purchase price into the property in repairs. That sounds like a pretty big job relatively speaking. Definitely budget for overruns.

Also consider staging the repairs so that you can get some income started before finishing all 4 units. It might make some sense to work on all 4 at once. I would go the other way just in case there were delays. Having half the income to help cover the monthly payments is lower risk though maybe slightly slower or higher costs (trades having to come back out).

Have you run a project like this before? Are you doing the work or hiring it all out? A suggestion is to get a professional inspection and then use the inspection report as the list 3 contractors bid on. Each one submits a bid for the same set of tasks. The bids separate labour from materials as there really should be little difference in the cost of the materials. It is all about the labour rate, the speed and the quality.

You can decide if you are going to pick up the materials. You can benchmark the price at Lowes or Home Depot so even if the contractor picks it up you know the prices. Just expect that when the contractor orders there will be surplus that seems to have left the site compared to you delivering the materials. It is what it is.

John Corey

Is this a good offer to investors? - Posted by Don

Posted by Don on June 18, 2006 at 10:43:15:

I am picking up a 4 family. I can go with hard money or private investor.
Price 40-45k
Rehab 15-20k
After repair value 100-110k
The rehab could be a bit less, dont have exact estimates yet.
Property will rent for approx. 1600 per month after fix.
In good working class area of city will rent fast. I am looking to keep it for rental income. Although I could flip it fast but would rather pull money out and pay back investor with a refi. I own a single family house rental down the street a couple blocks away.
I am looking for hard money or a private investor to put up cash for purchase and rehab.
Will pay 16% interest only payments for a year with no prepayment penalty (negotiable). WE will refi as soon as we can or bank will allow after fix-up depending on seasoning requirements to cash investor out. All the pros out there does this sound like it would be attractive to investors? I will want to do the deal as soon as I get concrete numbers for the rehab.