Posted by Paul Macdonald on November 14, 1998 at 19:06:10:
Amost the only time you can get cash out (under almost all types of loans - conforming, just missed and downright flexible) is to refi. - and almost always after the one year window where the underwriters use the purchase price or appraised value which ever is lower rule. Some lenders -starting to fall within the hated hard money lender catagory - will let you cash out sooner at appraised value but not on the programs I quoted.
If you remove the cash out aspect purchase not a problem. If you’ve owned the property for one year or longer no problem on the cashout refi.
Posted by Paul Macdonald on November 11, 1998 at 09:30:39:
Hi Roy,
I work for a direct endorsed lender and a mortgage broker (two different umbrellas for different need clients). Permanent, single closing 30 year fixed rehab/construction money starts at about 8.5% and goes up to about 13% - with different requirements and rates and fees depending upon your credit, LTV, etc., etc.
Hard money costs too much. And all too often Hard Money is used because the borrower doesn’t know where else to go. 180 days past due? A BK yesterday? Under 65% LTV and the loan is a piece of cake WAY WAY cheaper than hard money.
Good credit no money? Co-signor with income. Or with assets.
No co-signor? How about the seller? Seller take back of 25% or more creates a no money down (thank you Robert Allan) deal!
Seller won’t take back? How about a l/o with all rent credits applied towards purchase and the lender treats the process as a refinance vs. a purchase?
Seller won’t take back or l/o? How about a simple substitution of collateral to another property and you ca
“Buy it, Fix it, Sell it, Profit!” - Posted by John (KS)
Posted by John (KS) on November 10, 1998 at 12:51:04:
Kevin Meyers says you should expect to pay 15-18% sometimes more. I am in the process of reading his book “Buy it, Fix it, Sell it, Profit!” I have heard that it is a must for any rehaber. In my opinion, Rehabbing is too much trouble. Money is the problem, I have yet to see an easy way finance the properties even if you have a private investor. I don’t like the hassle of waiting for 1-3 months for the home you bought to get in the market, then you only hope you make a profit. I am sure people are making good money at rehabbing, but it scares me. This is only my opinion, and I bought the book thinking it would change my mind. It does have alot of useful info for rehabbers, guess rehabbing is not for me. Good Luck and don’t let my opinions influence you negatively.
An investor needs to have many tools in his toolbox, one of which is a hard money lender. There are times when a deal is too good to pass up but no other method (option, conventional loan, owner financing, collateral substitution, etc.) will make it work. Sometimes there are time constraints.
A hard money lender can be a cheap solution when you consider the alternative. You may have to pay anywhere from 1 to 8 points (although 4-5 points seem to be the norm) and 13-14% interest. But a good hm lender can give a loan commitment within 24-48 hours and can close in a few days. If you’re going to quickly flip the property, that high interest rate is relatively insignificant. Rather than lose a profitable deal because of a lack of time, I’d gladly pay those fees.
You certainly don’t want to use hard money for all of your loans or if you’re going to hold the property for any length of time, but there are times when no other creative technique will work as well.
Posted by Paul Macdonald on November 11, 1998 at 09:38:32:
My post was cut off - here is the remaining part;
Seller won’t take back or l/o? How about a simple substitution of collateral to another property and you can get a 5% down investor purchase with Fannie/Freddie conforming lenders and NO mortgage insurance!
Good credit? No income at all? 85% no inc. cash out.
Good credit with income? 90% INVESTOR cash out!
Bottom line there are some darn good deals and they can be very creative also.
“In my opinion, rehabbing is too much trouble.” Have you done any rehabbing? I assume you haven’t, but then how can you say it’s too much trouble? I’ve only rehabbed my personal residence, but I did many of the same kinds of upgrades you’d do to an income property, and it wasn’t particularly troublesome…I hired a competent contractor who did what he said he would, on time, for the price he quoted. When I find a property needing repair work, I’ll call him, get his quote, and adjust my offer accordingly.
John, if the risk of running into problems is too much for you, by all means don’t do it. But do yourself a service and make the decision based on experience, not fear.
Posted by SCook85 on November 10, 1998 at 23:06:19:
John,
Rehabbing becomes a science once you have done it for awhile. Most people hit bumps in the road as they go and this is what makes them better. The key is not to hit a wall.
There are different grades of rehab that can take a few days to a few months. Homes do not need to be tied up that long. Once someone is established and has developed a base of contractors rehabs can be completed very quickly. If you are like me and marketing the property before taking title to it, you can have them sold within weeks. You should know when going into the property how much money you are going to make and not hope to make some after you are done.
I am only on my second rehab as we speak going to be starting number 3 next week. Number three will take a few days.
I learned a lot about rehabbing by flipping to rehabbers. you learn there tricks and how they do it. There are many people making a lot of money.
In response to you Roy, I don’t use a mortgage broker for any of my purchase money. Thay doesn’t mean none of them have rehab money but I go directly to the individuals doing the lending. I have 9 private investors behind me now. they range anywhere from 12% and 1 point to 16% and 6 points. The two that I use are at 14.9% interest only no points and 14% and 2 points. They know the areas real well, and give me mortgages in a matter of minutes. appraisal and no credit check. They lend up to 70% of appraisal is all that is needed with one, nothing with the other, no cashing out (not yet anyway). Just make your payments on time and they will do almost anything for you.