New Investor - Posted by Tom

Posted by Ed Garcia on January 09, 2001 at 19:59:34:


I take it you have good credit, because you’ve recently purchased you 4 plex.

My suggestion is for you to make your offer as you’ve told us you’re going to.
If the offer is accepted, I would then have a contractor bid what it would take to bring the property up to market.

I would then go to my local bank and show them all of my numbers. I would show them what market rents are in the area; I would show them comps on like properties. I would show them what I’m paying for the property and my contractor’s bid for repairs to bring the property up to market value. They then could see that I bought it for $30,000 spent $50,000 in repairs, ad another $10,000 for loan cost, holding cost, and debt service.
I’ll be in it $90,000 and the values $180,000, that will give the bank 50% LTV.

I would show them I have a performance clause with my contractor and allow them to plug in down time for repairs and to market the property to rent. I would tell them that I would like to pledge my other 4 plex as additional collateral for one year and then roll the loan into a take out loan ( permanent 30 year financing). In essence, I want them to treat the deal like a construction loan allowing them to put my contractor on a voucher system.

Tom I want you to digest what I’ve just told you in this post, and then if you feel you need clarification, call me at (909) 944-0199.

Looks like a good deal, Good Luck Tom,

Ed Garcia

New Investor - Posted by Tom

Posted by Tom on January 09, 2001 at 12:21:52:


Hi. My name is Tom, I live in New Jersey. I have recently bought my first investment property. It is a four unit building, which is semi-detached from a three unit building. The gentleman who owns the other half had done some massive exterior renovations after the township condemned it. However, he ran out of money when he started renovating the interior. It has been vacant for about a year and I know he wants to sell. The person I bought my building from said he wouldn’t give the guy more than twenty grand. My half I bought at 108K. I know I could use an FHA 203K to finish the work, but it would only make sense if I can get it at 20-30K. The owner has about $180K invested in this property according to neighbors. How should I approach him. Also, can I get a 203K loan just for the renovations even if I pay the seller the asking price in cash. It will probably need at least 40-50K dollars in repairs. When finished, however, it would not appraise for any less than my half of the building.