Potential First Deal. Need Help, Please!
Hi there..
I am a new real estate investor looking to break in. I have a potential deal that I am looking at doing, and I need some advice on what you guys (the experts) think about it. I also need some advice about what financing options I might have. Here's the deal:
I have located a 1500 SF house in the Denver area that would sell for around $210,000 ARV. The asking price on the house is currently $173,000, but it has been on the market for over 6 months, lender owned, and my agent is confident that I could pick it up for around $135-140K. I figure on about $20-25K in fix-up costs, which is a number that I am confident in due to my experience as a general contractor.
I have poor credit (FICO 580) on the mend, and I currently rent. I don't have any money to put down, and don't know anyone from which to borrow the money required.
I have looked into hard money loans, which would get me about $136,500 at 65% LTV, but I would need the purchase price, plus rehab costs, plus holding costs, which I have calculated would total out to about $177K.
Any ideas on how, and if I could make this one happen? Thanks so much for any advice that you can offer.
Matt :-?
Matt,
1. Sell the deal on as a wholesale deal. A bit hard when it is listed as you need to at least get it tied up and the seller might want to know about your credit before they accept an offer. Worth checking.
2. Find a partner. Get over to the local REI club meetings. Ask around. See if you can find leads from people here who are local to you.
3. Run an ad in the paper offering a good deal to a buyer. Indicate that you can help with the financing if they have the down payment. Then work a deal where they put up the down payment, you do the work and then they take over the HML until they can refinance. Not exactly like I just highlighted but it should provide some ideas.
John
[addsig]
Matt,
I think John has you on the right track with his suggested options.
With your experience as a general contractor, you have something to bring to the table in a partnership. If I were you I'd be searching out investors in your area to partner with. They bring the money and/or credit and you bring the rehab expertise for a win-win.
I also understand that your agent wants to make a commission but he may be a little overzealous in his numbers. If you offered $122K and did $25k in fix up, that would put you at about 70% and you should have takers quickly. Good Luck.
Dave
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"Opportunity is missed by most people because it is dressed in overalls and looks like work." (Thomas A. Edison)[ Edited by dealfinder on Date 06/14/2004 ]
John, Dave:
Thanks to both of you for your suggestions. I guess I am a little sketchy on the suggestion that John posted about the wholesale thing. Could you fill me in on that at all?
I think that I could definitely offer less for the property. It has been on the market for over 7 months, and the lender seems desperate to dump it from what I've heard so far.
So I hear you both loud and clear on the partnership idea. Obviously, I would like to try to go it alone if at all possible. I have heard of "split-lending" deals where a HML lends, and is in first position, and a traditional mortgage in second position. Is this a viable route to even look at, or does it even ever happen?
Again, thanks for the advice. It certainly helps.
Matt
A 580 credit score you can get (90%-100%) financing. I think you better check around some more for financing. If the appraisal comes in OK you will not need any partners.
Bob H.
If I get the property appraised, that will be based on the current value, not the fixup value, correct? Are there any banks that will lend 90% of the after fixup value? Thanks.
Matt