Many Questions
I have no idea which forum to post this in. I posted in the rehab forum a protion of the problem and now have more problems. To begin with, I am not and investor, however if I can get this deal to fly, I could take the money that is deal could bring and start investing. I have read for hours here on this site, from posts in these forums, to articals, and haven't had the answer to my problem slap me in the face yet. So I come to you good people for guidance. Here we go.
I have been "GIVEN" free and clear a 80x 280 foot lot in a pretty good neighborhood in Michigan, just north of detroit. The lot does have a house on it. It is horrible. Not livable to say the least. Our intentions are to repair or rebuild the house and live in it. We have a contractor willing to repair the house and add 900 sq ft. at 94.00 a sq ft. I have dealt with 2 banks or mortage brokers and they had me all ready to go, and then...problems. The 1st problem was a seasoning issue. Killed that deal. 2nd was the fact that the house is not lendable. not insurable.( I know that, and that why I need the money to fix it), which I told the broker to begin with. My credit and husbands self employment will not allow for a Lot loan. The going rate on a lot in the city, this size is roughly 90,000. I guess I have given to much info. I really want to know how to find private lenders willing to invest, short term(1 yr) so that I can build this house, and then get a regular mortage. The ARV of the house and of course the land would be 185,000 easy, given the neighborhood and value of the other older homes in the neightborhood. In reading the articals and other posts, finding a PI in the news paper can be risky, and I can just look in the phone book. Once again, I could start investing in other properties, using the equity this one stand to bring.
Perhaps you can consult with an FHA approved, direct lender for a 'buy and fix-up' loan, or a 'refi and fix up loan'.
There used to be a program called the FHA 203K, but I don't know if it's still in use.
Short Sales,
Thanks for the reply. I am fairly sure that the broker looked at that as well and, my credit score and my husbands self employment was an issue..
Does your contractor have a written proposal, and how long would it take them to do the work?
Don't know if this would work, but just a thought. You own the property free and clear. you need about, $85,000 for the contractor, call an ad in the paper for investors that buy contracts for a discount
let's say 25% discount, create a contract for $115,000 discount it to your investor, have the work done, and you have a house worth $185,000 with $70,000 equity. The investor would probably want to see good proof of the contractors abilities.
Just a thought,
Marv
Marv,
That may be a good idea. I will check the paper tomorrow.
Thanks[ Edited by ra_gordon on Date 07/24/2004 ]
What about a hard money loan? It's short-term, interest only payments for about 1-2 years. Once the work is done, you refinance or sell and pay off the loan. Your mortgage broker should be able to hook you up with someone, even a private investor. Or try your local bank. They may carry a portfollio (loans that they don't sell). Hope that helps!
If you use a reputable contractor you might be able to deal with him providing you qualify for a loan.
I have fronted thet deal and then put the package together for the owner/end buyer when the property is in FHA condition.. Of course I make a nice profit and you would have to deed the property to me as security.
I am sure that there are people like me in your city.
[addsig]
Thats what I am looking for, A private or hard money lender in my area. I am having a problem locating one. My contractor is reputable, however not big enough to carry this sort of debt.
I really don;t think the hard money lender is your best option.
Any experienced contractor worth his salt salt should be able (and willing) to do a 95k job for 100k, with the security of the house/land worth 185k as collateral.
If you are experiencing a seasoning issue, maybe you want to hold the land for a few more months until the 12 months is close to up, then hire the contractor to do the job.
basically what i am suggesting is that you use the contractor's money to complete the rehab and if seasoning is not your issue, then you should EASILY be able to do a 50% LTV loan to payoff the contractor when the job is complete. His security is that if you don;t pay him, he'll take the house through foreclosure on him mechanics lien.
don't borrow trouble, work with a financially strong contractor; you'll both win