Hard Money Question
I have a question regarding foreclosures and hard money loans.
Let's say I have found a foreclosure that is listing for $259,000. The Fair Market Value after repairs is $375,000 and it needs approx $30,000 in repairs.
There is potential to make $86,000 here. But I will only be able to get a hard money loan for $243,750.
$375,000 * .65 = $243,750
This is not even enough to cover the price of the property let alone repairs.
How would you go about acquiring this property?
Thanks,
DrZ
A HML is a non-starter if there is not enough equity. Some HML deals will use more conservative numbers then others.
If you can not use a HML then either the deal is not really worth your time of you will need to find another source of capital (Partner with a HELOC or cash)?
If the equity is not there for a HML start with the assumption that the deal might not be as good as you think. The reason for saying this is if something does not work out like you expect (repairs are more, holding costs because of a slow market, sale price less then desired) you have little margin.
The 86K sounds like a lot as it might be more then some people's annual salary. It might also be a lot less rather quickly.
If you still believe in the numbers and the deal then your views might be strong enough to attract a partner (check with local RE clubs, etc).
John
[addsig]
You can use several strategies in the purchase of this project and I will cover a few to give you a general ideal of what you can do.
You can approach the REO hold with a discounted offer also known as a short sale.
Seek out government, county and or city funds for rehab projects
Bring in a partner for the difference of the purchase price and rehab cost
Use part or all of a retirement plan for the project
Good luck
[addsig]