First Transaction - Need Help
I am looking at doing my first transaction.
It is a duplex being sold by another rehabber that does not have time to finish it.
The cost is $35000
The exterior is completely rehabbed
when interior is complete the FMV should be between $70000 - $85000
Large duplex in redevelopement area
My question is now that I know that I want it what is my first step ?
Seller advises that he would be willing to hold paper until rehabbing is done ? Would I want this or is there some risk for me with that option ?
I am better off to get the $35K hard money and if so what is the suggested way of doing the transaction.....
Thanks :-o
There isn't much risk as long as you close on the property like you would do with any other poperty and that the terms of the note he is holding is pretty standard. You don't want some impossible term in there that you can't meet like a gigantic balloon payment.
The rehabber may just be looking for some cash flow and if he is offering terms as good if not better than a hard money lender, I think you are OK with him holding the paper as long as all the T's are crossed in the process.
Hire a broker. I despise the thought. But i think you should. Either that, or bring in a partner.
for what purpose would you hire a broker ?
What are you going to do with the property? That is a big point that is missing. Are you going to fix it and sell or wholesale to another person? Or are you going to keep it for a rental property.
Lori
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I am going to finish rehab and sell the property
Then you plan to retail the end product. I weould not suggest a broker in this case. You would be better with a hard money loan
Lori
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Hi Lori
But I dont know how do find hard money !
Hey,
Maybe I am the only one to look at this deal this way but...
If an experienced rehabber is selling the property, unfinished, to an inexperienced investor, maybe there is a reason!!!
I do not see where you talk about the costs to repair the unit (inside) or the time it will take. What are they?
$70k to $85k is a big swing (over 20%)on FMV. Where did you get this number?
Why is the rehabber not selling this house to one of his other contacts?
Hi
The 75,000 - 80,000 comes from the comparing the sales in the last 6 months of homes built the same year, same square footage on the same block. One house down just sold yesterday for 85,900 and the outside appearance was not nearly as nice.
Also we estimate about $15,000 on the repairs to the inside of the property that would need to get done prior to resale.
The current holder of the property has stated that he has too many projects going at one time. I also looked up on line the reports of the property form the city and all citations have been repaired.
Thx
I don't see much of a difference between getting a hard money loan or the seller financing in this case. Either way you are getting a loan, and it's the terms of that loan that are important, not where it comes from.
Hey,
The FMV numbers tightened up on your last post ($75 to $80 and not $70 to $85) and that makes a lot more sense.
HML are fairly easy to find. Every week there are ads in the paper for them. One of the best sources is to call the I BUY HOUSES ad and see who they use. Most investors will talk to other investors, as long as it is quick and professional.
Riedel:
Have the owner carry paper for at least 6 months and then turn around and refinance it with a good loan! Due to the fact the price is so cheap, I would do a 5 year interest only and have some positive cash flow. You can work towards paying off the loan with other deals you do in the next 5 years!
Best Regards,
Jeff Adam
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