First Time Investor - Rehab
Where I live there is an area that is "hot" right now in terms of restoration. I am a first time investor and have been looking at properties. I am looking at properties that are in the $85K range and I expect the property to need about $50K worth of rehab work. What is the best way to go about financing this without using any of my own funds.
Thank you!
Hard money lenders. They charge a pretty penny(4-6 pts and interest ranges 13-18pct)
However they will generally lend 65% of after repair value. If the deal is good enough this could mean no money out of pocket
Thank you so much. For give me for asking waht is probably a stupid question, but do I have to come up with my own funds to pay the loan payment every month? Running this scenario, let's say I buy a house for $100,000 and the ARV is 180,000. If they will loan 65% of that, that would be $117K. Assuming an 18% interest rate over 1 year, that would be a monthly loan payment of $1755.
you can ask the seller to owner fin. for x amount of months. if it needs rehabb. and he wants to sell the odds are he has lost interest and/or is out of money. he may see that getting what he wants could be difficult in its present condition and maybe willing to fin. that would be my first move.......kenmax
Just an observation... If you are a first time investor you may want to seriously look into wholesaling a couple deals and atching them through the rehab process from more experienced investors. If your area is "hot" in terms of restoration, then you shouldn't have problems finding buyers to do the rehab and give you a couple grand per deal in the process...
Just something to think about!
Good Luck!
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Ditto what Matty suggests. Also, get apprved with at least one rehab lender NOW. Waiting until you've got a viable deal and losing it because it went stale is a good way to lose and quit before you ever got started. Once approved with most rehab lenders, always approved - only the properties are an issue after they approve YOU. THis is what I do for my potential borrowers. Another thing, doing what Matty has suggested also develops rapport with the rehabbers in your area; you're not as likely to be viewed as competition as you are an ally if you're providing them with eseentially "pre-packaged" deals. I found that fewer than 1 in 8 of the people I got approved as rehabbers did ANYthing after they were approved. This frustrated me and confused me, because each of them were chomping at the bit to get going ASAP with rehabbing homes. So, I got to thinking about it, arrived at a few likely possible reasons and decided to contact them and put my theories to the test. I took my list of approved parties, and I never went past the sixth name on the list. The process was simple - I called, asked if they were still interested in rehabbing, got relatively the same answers each time: "Well, y'know, things are pretty busy and my plate's full right now, but mybe soon..." My next question was, "Let me ask you this... if there was some way that someone could bring you properties that suited your interests, would you...?" I'm here to tell you that the response was universal. Each of the 6 called interrupted me and were more than eager for that kind of help. "I can fix 'em, I can sell 'em, but I completely choke just at the thought of finding them and negotiating the price. If you've got someone that's set up for that, count me in." So, you'll be developing future goodwill and customers. When you get into your own rehabbing career, you won't be making waves quite as large as you'd be making if you just jumped right in. Some of those folks will still approach you at times to see if you've got any overflow you wouldn't mind passing on to them. Some need to keep their crews busy, too.
Anyways, I know that what I've related is highly subjective as applies to me and my situation. I brought it up in case it could help. I don't post much, but rehabs and commercial are what I love most, and I figured I might impact your beginnings in a positive way. Sure I can get someone a mortgage on a primary residence, but to me I just put them in debt for XX years. But rehabbing and commercial -- I get money for people to use to MAKE money... now THAT I can live with.
Excellent Point TM!!
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Thank you very much for your replies. I really appreciate your thoughts and assistance. It's not easy getting started!!
:-?
Okay, here's something - I got a PM from someone, not sure if from this thread or not, but point is I can't access PM's from anyone - I'm not a paid subscriber.
Anyways, if from here, send an email to **Please See My Profile** Sorry.
well, THAT didn't work very well... instead of violating any rules by posting my email address, just post question here.