Hard Money Quote
I just got a quote from a HML and I was hoping to get some opinions on it. Here is a quick breakdown of the deal:
Purchase Price: $165k
Holding Costs: $10k
Rehab Costs: $40k
Sale Costs: $16k
Repaired Value: $275k
The HML is offering to lend me puchase money only at 15% plus 6 points.
My FICO is 650 and my wife's is 700. I am really looking for purchase cost plus some rehab money. I do not need the rehab money because I have an established line of credit that will more than cover the rehab. It would just be nice to use other people's money for some of the rehab.
Does this rate seem competitive? This is my second project. My first was a conv. loan and personal rehab money. I am under contract on this property and need to consider all of my options quickly over the next few days.
Thanks in advance.
That sounds about right using a 65% LTV of the after-repaired value:
165K= purchase price
9,900= 6 points
175K= 64% of 275K
What is the maximum LTV that the lender will go with and do you have another piece of property you can use as cross-collateral in the deal? Also is the owner willing to carry? Just some ideas.
Aaron DeCollibus
"cross-collateral in the deal" =Blanket Mortgage, more than 1 property used as collateral for 1 note.
Be real careful with Blanket Mortgages.
Old saying "He who gets under the blanket, usually winds up getting ******!"
Not much fun when dealing in RE!
Seems high. We're getting 12% and 4 pts in Denver.
Why don't you get a conventional rehab loan on this one? Much cheaper.
You can go conventional, but it depends on how fast you need the money. Hard money lender work fast and are best if you're looking to get in and out. Cross-collateral helps if you can't get the property to fit under the LTV that a lender requires. I agree with the above, but if you're confident in the project and your ability it works.
given your data and making assumptions of annual property tax of $3000 and estimated holding period of 6 months, I estimate about a $20,800 profit, Is this what you come up with?
$20,000 is the number. Of course, the game will be to negoiate with the subs, etc., etc. to try to get the rehab costs down. Since my post, I have looked into some conv. options and it looks like that is a better option. The points and the interest are cash flow killers for me. I assumed that most of my deals would come in much lower than this one did. I had figured on purchase prices around 80k to 100k with 15k to 25k of rehab and a ARV of 125k to 165k. I am just getting started, so I don't want to say that there are no deals like that in and around New Orleans. What I can say after looking for opportunities diligently over the last 90 days is that those lower end deals are not as plentiful as the deal that I am involved in. Of course this is factoring in saleability, etc.
Can someone please clarify for me why the tax assessed value should be taken into account when determining the profit potential of a property??
Your rehab cost seem a little high. Does this house have major problems? You want to maximize profits and you are not going to be living there. The most important thing to remember in rehabbing is neat and clean. Never fall in love with bricks and mortar!
Correct me if I'm wrong but i think there are hardmoney lenders that don't roll the points in, they let you pay them at payoff.
Michael