One Of My First Rehab Deals..
I am curious about the sources that you guys are using for financing your rehab costs?
Here is my current situation:
There is a pair of properties that I am putting an offer on for $150k. I have about $30k cash on hand. I expect to get a 80/10/10 loan so that I only have to put $15k down. Closing costs will likely be in the $3-4k range? Anyway, that leaves me about $10k for rehab costs. I expect my rehab costs to be about $60k for these 2 properties.. This is based on a quick guesstimate of $20/yrd cost.
So, this leaves me about $50k shy for financing this deal. How can I do it!? Any ideas you guys might have would be awesome. I really want to get in on this deal because I know that houses in this area are going for much more than what these houses are priced at.
Sam
Some more information is needed? What do you plan to do with the houses? Rent or resale? What is the FMV of the houses and the FM rent for the houses? What is your exit plan for the houses? My advice is to find a hard money lender to fund your purchases. This will keep you from having to get permanent financing on a house you plan to sell. Also,$30,000.00 per house to rehab seems high. You have to remember you will not be living in the houses. Neat and clean is what you are looking for.
Hi Michael.. thanks for your response.
Based on similar houses I have seen in the area (few blocks away.. and similar features), I expect to be able to sell them for $120K or so each. I plan on purchasing the properties and starting rehab work immediately. I hope to have them in close to finished state in about 3-4 months and hopefully have them sold before 7 months time. I do not intend to rent.
What are some things to look out for when dealing with hard money lenders? Is there an alternative. I know that they typically have VERY high interest rates.. 15% or more anually. If that is the case, won't I be better off just getting a more typically mortgage and then using revolving credit to finance the rehabbing?
If you are going to sell them individually and have enough revolving credit available - you could rehab one at a time and then sell one to gain cash to work on the second one. Revolving credit is a great source for rehabs as long as you know you can get that debt back down again in a reasonable time.
I wouldn't even consider the hard money if you can get the 10% down financing.
Good luck,
Noel
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