Posted by David Butler on December 08, 2000 at 16:15:46:
You’re telling me Sounds like the kind of problem we would all like to have on a regular basis!!!
And it sounds like you have several options to look at here… but, I am just a bit confused about what you need - $15k or $30k??? You need $15k for the seller, and if I am following you here, another $15k for fix-up???
In any event, don’t get caught in the trap of being interest rate sensitive to the point of having tunnel vision. I am confounded that your bank won’t give you a loan on #2 for $30,000… but you should be able to get that money somewhere all day long, and absolute worst case paying maybe 8 points and 10% interest. To put that in perspective, you would shell out roughly $3,000 in closing the loan, and be looking at $322 per month on a 15 year note… to lay into a deal that gives you $35,000 built-in equity going in, and approx $675 free cash flow at the premium rents. The additional $400 in monthly rent pays the $322 and leaves you with $78 net cash flow on that differential, plus gives you additional tax write-offs, and substantial upside by way of appreciation and equity build-up.
Based on what information you have provided, I have to believe you can do better… but if not, WHO CARES ;-), right?
But I would give Ed Garcia a call TODAY and get the ball rolling on some more financing!
By the way, I’ve had occasion to use those unsecured checks I get from Beneficial Finance to close out deals, and those things run at 30% to 36% depending on payback and front end charge. I’ve done that holding notes for a short time, and still make a very good lick, because the cost is relative. They are quick and clean, and almost no paperwork… on $15k, the difference in the two year payback terms between 36% and 10% is $194 per month ($886 - $692), and with a six month holding period cost me $1,164 difference, and I net out $5,000 and up in profits. Hey, when I can beat that great, but when I can’t - SO WHAT???
Hope this helps, and best wishes for your continued success!
David P. Butler