Rehab Advice
Hey gang...I wanted to get some feedback on a few wholesale properties that I can pick up pretty cheap and rehab. I have a contractor that can do the rehab and save me lots of money. My question is, is there a huge difference between ARV and FMV? It seems as though ARV is very subjective. For instance, I will post a couple of the deals and try to get some feedback. Also, would a hard money loan be an option for these? Or is that primarily for when there is real equity in the house, not just proposed equity after repairs. I am just getting started and trying to do a no money down deal, while rebuilding my credit at the same time. Thanks in advance.
Deal #1:
2 Bed 1 Bath----------------------------"New"
Asking: $57,5KRehab: $10K
ARV: $115K
Viewing: Vacant, on lock box, #1950
Deal #2:
" Sits on 1 acre of land "
2 bed, 1bath
ARV: $ 120K (After repair value)
Asking: $ 44K
Rehab: $10K
Profit: $66K
Thanks again..
Brian
After Rehab Value is very subjective, The only thing that really matters is what can you really sell or rent it for when your done... I suggest you get some real Comps in the neighborhood talk to a RE Agent or an Appraiser you can trust. Also be careful with a Contractor who claims to be able to do work way under everyone else. He maybe able to work on one or two but will soon see the real cost of doing business and may even get in $$$ trouble. Quick tip never trust other peoples estimates on Value do your home work and make sure the deal is good for you.
That's what most people use hard money for. You can get up to 65% of the ARV. Most instances you don't get any cash property is paid for then the repair money is given out in draws as work is completed.
ARV should be the same as FMV. Some hard money lenders will require an appraisal for current and ARV to fund the loan. Look at the tab at top of page for lenders can find some for most any area of the country there. If you can't find one there PM me I have found a few to use here in fl and ga.
Scott, thanks for the response. My best friend is a builder for a high volume home builder here in town. He has some pretty good connections with his subs who are always looking for side work for real cheap. I am actually trying to get him to start his own thing doind rehabs, as he is great with that sort of thing. Is there a market for him in REI? I understand what you are saying about doing the comps. Can I have a RE Agent do the leg work to check the comps? Also, when lookintg at properties like these, can I use a buyer's agent? I can really put her to work while looking for other properties. Thanks again.
Brian
Brian,Be careful when dealing with a2/1 house they can be hard to sell or rent. When doing comps be sure you are comparing apples (2/1) to apples (2/1). If the majority of the neighborhood houses are 2/1 you should be OK!
Hey guys, thanks for all the reponses. If a hard money loan is for approx 65% of the ARV, how exactly do they determine the ARV? Through comps? In these specific deals, even if the TMV (true mkt value) is much less than the original mentioned ARV, I could still flip for a decent gain, right?
Also, I have a friend that would be willing to help be get the loan. He has a 790 middle score, while mine is 550. He knows nothing about REI, but is a good friend. Should I bring him in to help get maybe an interest only loan and split the profit with him? I really just want to get started. If not, should I pursue the hard money option? Thanks gain in advance.
Brian
I am having my RE Agent start doing the comps next week.....
Dear Brian,aka Sun Tzu, If you are going to use his name read The Art of Warfare it is directly applicable to what you are doing.
I would use your friend with the excellent credit, but I would not include him in profit. I would establish an interest return on the monies raised with his credit.
For instance, he borrows $10,000 for you and has to pay 8%. Give him 12% interest. He makes a profit and knowing in advance how much there is no argument. Keeps the deal clean and you of course have the profit. He gets paid back with interest on close out (sale) and you also get paid at that time.
Experience teaches me after about four deals your lender will make higher demands. So you start to find your backup lender as the request for more return on his monies is almost a standard of human conduct.
Enjoy your deal looks good. You might check the deals per month, aka sales per month and check them for conformity with your target properties.
Get rich. Read Sun Tzu you need it.
Lucius
I saw that deal from one of the so-called "Wholesalers" here in Atlanta. Keep in mind, you're not going to get that much for it when you sell it, and the rehab's going to cost 1/4 again as much. And, if you're going for a rental, it'll be either a break even, or you'll be bottoms up on it. Typically, you're not going to get a bank to touch properties like that, you'll have to get a hard money lender to get it into your name, then refi it once your rehab's complete. So, add another 12-16k onto the price, THEN add the refi fees, so you're probably looking at a true price of 80k for that house.