Is this too big for a newbie with little cash???? - Posted by Heather

Posted by Kent C on February 19, 2002 at 04:53:33:

I smell $20k fixup money in this place, paying others to do ALL the work anyway. Those windows can cost $150 ea + $150 labor or $300 x 20 windows perhaps = $6k alone!

I’d go for bidding $70k with a mention of the money you will have to sink into it. Settle on 90k with them holding a second on a 24 mo balloon. Get a first from a bank for 80% of the purchase cost.

Put 20k into it, mostly farming it out while you go look for the next one. Line up hard money lenders for the fixup money and keep your cash in the bank for emergencies. Be done at $110k.

Go get an appraisal around your $170k mark. Get an EASY refi loan at the 80% level ($136k). Put the $26k with the other 10k you have in the bank. Meanwhile put this house up for sale to get the rest of your money out. But you have money to make payments with now. You are also ready to do another deal and NOT require either the 2nd mort or the hard money lender, your choice. But ALWAYS keep some money in the bank…sh_t happens.

Note that you paid off the hard money people at refi time.

The HARDEST thing here is not the math. It will be compiling the list of vendors to work for you and managing them…let the fun begin.

Kent C

Is this too big for a newbie with little cash??? - Posted by Heather

Posted by Heather on February 15, 2002 at 15:35:04:

Hi all,

Here’s the deal:

The house is located in a VERY desirable Charlotte, NC neighborhood, average time on market is 72 days. Over all sell average for the neighborhood, once rehabed, is 177,335 and the average for the comps (about 1,200 hla, 2/1) is 164,000,again after rehab.

The house is listed at $104,000 but think I could get it under or at 90,000. Waiting on rehab estimate to come in, but shouldn’t be more than 10,000, if that. Really depends on if the kitchen is gutted and redone, other than that and the roof, it’s mostly cosmetic that I could do, but would need financing to do it.

Here’s what it could use - a privacy fence, deck, landscaping, pull down a tree, refinsh hardwoods, pull out drop down ceiling, new windows, new kitchen, and conversion of a weird room off kithen into a mud/laundry room and other half into an office. And of course other misc…

I really think there is a bunch of $ to be made off this but I am finding it hard to come up with financing. I’m working on a hard money loan right now, but I’m a bit worried about the closing costs and $ to hold it while rehabbing. I can come up with about 10,000, but that’s it and it’s not seasoned.

To make matters worse, my credit score isn’t great, around 620, but most of it is explainable ie - will be followed with docuementation of why it shouldn’t be counted agaist me… In addition, my debt to income is pretty high. I plan on using 50% of the profit to clean up my debt and reinvest the other 50%, if I ever get there!

I’m beginning to think I should maybe drop this deal and find a smaller one.

I’m pretty much open to anything - would anyone want to take me and the house under their wing and make some money? I don’t mind sharing - the knowledge I could learn would be well worth it.

Any advice is much appreciated!!!


Re: Is this too big for a newbie - Posted by CAW (OR)

Posted by CAW (OR) on February 17, 2002 at 03:16:59:

Unless you are going to do every stitch of the rehab work yourself and have a really good bargain place to buy materials, I think you are really optimistic that you can do all of that improving for $10,000. Extensive rehab is not the best place for beginners to start. Fixers that are strictly cosmetic are the best ones. Fresh paint inside and out works wonders. May I suggest that if you buy this house that you do fresh paint and refinish the floors. Tidy the yard and add pots of bright flowers and see if it will sell at that point. Unless the roof has holes in it, try to sell it before doing the roof. Sand and paint the kitchen cabinets and maybe add kitchen carpet if the floor is bad.

You can not fix the house up like you would live in it yourself because many improvements, while they make a house easier to sell, do not increase the value of the house enough to pay for them. If you can get the house to look clean and fresh, then someone might buy it, wanting to fix it just like they like it.

Have you spoken to at least 6 banks? It doesn’t sound to me like you should have that much trouble getting a bank loan.

Is this house suitable for a rental? Would it make it’s own payments? If so, consider buy and hold. Paint and tidying up would be just about all you would need for a rental. If you hold for awhile maybe you would be in a better position to really fix it up in a few years.

Whatever you decide, I wish you best luck.

Is this too big for a newbie with little cash??? - Posted by Graywolf

Posted by Graywolf on February 15, 2002 at 20:28:17:

Heather Hi,
With a score of 620 you should get this deal done with 10% down or even 5% anyplace. Check with mortgage brokers in your area.

Good luck