Rehab $$ Question

Found a foreclosed property for 20K. Spoke with the guy and repairs to make it acceptable would be about another 10K. He suggested using a credit card to buy and rehab and then refinance in one year or sooner. Any thoughts? Sounds kind of risky to use a credit card.

Comments(10)

  • rmdane200015th December, 2004

    I wouldn't say risky, i'd say expensive...depending on the interest rate. Are you talking about financing the entire thing (purchase + rehab costs) or just the rehab costs?

    I don't do rehabs, but I'd say you should be able to find better financing...

  • ejm415th December, 2004

    Yes, the whole thing. I looked at one hard $$ lender and by the time you pay the points, it is up to that amount.

  • InActive_Account15th December, 2004

    Do you own a home now? Can you get a home equity line of credit? They are usually interest only loans and would be much cheaper.

  • ejm415th December, 2004

    I did not want to get a h/e loan on my house.

  • jam20015th December, 2004

    So, do the numbers on the house work? What I mean is, what's it worth after repairs? If you're willing to put 30k in the house, what would the FMV be?

    Wait, you said it was foreclosed, so it's a REO, or has an investor bought it, and is now trying to sell it? If it's an investor, see if they'll hold a small note while you repair it, and until you can cash him out.

  • ejm415th December, 2004

    Bank owned and houses are selling for around 50-55K when repaired.

  • LadyGrey15th December, 2004

    Anytime you borrow money, it is risky, But it is also part of how you make money in RE. Few of us have the cash to just buy things outright.

    Your choices for money are:

    A) A home equity line of credit, which may be locked in at a nice, low interest rate (a good bet)

    B) A credit card, where you pay those sharks 8% or higher interest

    C) A buddy or ten, from whom you borrow the cash, and agree to pay it back, probably plus some interest.

    D) you pass up the deal, save up the added 10K, and then try to find another deal like it. Meanwhile you could have had the money, refi'd the finished product, and paid back your debts...and maybe even have some extra cash in hand from the sweat equity.

  • linlin15th December, 2004

    If you have one of those 4.9% card then it is a good deal. What is the interest rate on the card?
    I think the home equity sounds like a good idea

  • kfran123416th December, 2004

    If you really want to use a credit card, look for one with an introductory rate. Often you can get 0% for a year on transferred balances.

  • mitnc16th December, 2004

    its simple ya gotta pay to play

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