Group Of Small Fish..(trying To) Reel In BIG CATCH!
Hello,
Any suggestions on the best strategy for purchasing foreclosed LARGE apartment communites at HUD auctions? I have several lenders that seem to offer 75-80% LTV? Should I keep the max bid in mind to keep the LTV at 75-80% of the "appraised value"? How does this work in an auction scenario? Does "LTV" in commerical investing mean the same as residential?(loan to appraised value or FMV). In terms of if the loan, if the loan amount (possibly including closing costs) is at or below 80%, is there still any out of pocket costs? What is a "Letter of Credit"?(something HUD requires on property needing repairs). Sorry, I have a lot of questions and I am new to the commerical world. Thanks for any suggestions and/or advice.
[addsig]
Most commercial lenders will normally only loan 75-80% of the amount you pay for the property. Be careful before you bid on a HUD property and do your due diligence. A "Letter of Credit" is a letter from a lender stating they will loan you X$'s to make repairs.
Thank you Michael for the info. What exactly is due diligence (besides doing your homework. What are the basic steps you take when you are investigating a HUD foreclosure? So the bank only lends 75-80% of the purchase price, not the appraised value? What do you do if there isn't a lot of cash reserves amongs the group and this a million+ property? :-?
Shop around for a lender. If you have decent credit, you may find one who'll lend 90% or more of purchase price, provided the LTV is good. Wells Fargo will lend me commercial $$ up to 80% of purchase price only--no matter how good the LTV--but on pretty good terms since they often keep the loan in house. I also have an independent mortgage broker who can lend me 100% on the right deal--but of course he charges more for the privilege.