Re: Need help from experienced rehabbers - Posted by Carmen_FL
Posted by Carmen_FL on December 30, 1999 at 08:33:58:
I’m with Leslie. As a been-there newbie rehabber, let me tell you that it WILL take you longer and cost you MORE than you think. This deal looks very skinny to me as a rehab. I try to have at least a $30K spread on each deal, so I can make mistakes and come out with at least $15K. If you are selling it, and need to use a realtor (G-d forbid), it would cost you another $2,940; holding costs for 4 months = about $1,200. Now you’re looking at $7,360, assuming rehab actually comes in under budget. There are easier ways to make that kind of money.
If you are planning to keep as a rental, and don’t need cash out, then it may be a good deal. If you refi only to get out of hard money, and keep paying about $250/month (don’t forget taxes, insurance), then you could make a good monthly income. Don’t count on a quick refi, though. Debby is also right - I thought we could go out and merrily refinance after leasing it out to a nice couple - we tried for 3 months before finally giving up in desperation and selling the thing to another investor. The best offer to refi a non-seasoned NOO property was 70% of FMV. We had paid 65% FMV, so adding the rehab costs to that we would have LOST money. Even after a year or so, you most likely will not get 100% refi on a non-owner occupied. Best I’ve seen is about 90%, but 80% is about the norm, assuming you qualify credit-wise.
We vastly underestimated the time (read holding costs) and cost of rehabbing our first 2 homes. The third one we’re a little smarter on. On the first we had a tendency to over-rehab. Now, if it works, and can be cleaned or painted, it stays. Saved us a bundle! My new mantra - “It’s a REHAB, not a REMODEL! I am NOT living in the house!” Although my houses look very nice, they no longer need to be perfect in my eyes.
Good luck on whatever you decide!