Trying To Buy A Rehab
I need info on how to proceed on a rehab I've found. The problem:
Property is being sold under the tax appraisal. How do I go about getting financed with enough money to do the repairs but offer the seller a certain amount without the seller wanting to increase the price of the home? Do I trust the owner that they would give me the amount over what we agree on, for the sale, or do I have to get 2nd mortgage to fix the house? I would appreciate any suggestions. thanks
I need help. can someone answer.
You may consider using a construction loan from a local bank if you have a decent job and decent credit. They will fund a certain LTV of the purchase price plus 100% of the repairs. The excess funds will be released in installments as needed.
Other option is to increase the purchase price and ask for a credit at closing. Many lenders will not allow for more than 3-6% to the buyer. You would likely need a 2nd mortgage on this property or another property.
You are going to have problems trying to purchase investment properties without a good job and good credit. The only time I can use a bank is if I pull in a partner using his good credit.
GOOD LUCK
thanks myfrogger, I'll ask about a credit at closing to see how much it is. I'll findout some info on the contruction loan. My credit is fair, in the 600 score area.
So, I guess asking the seller to reimburse me the extra money beyond the asking price is out of the question?
Once again, thank-you.
I'm sure you have heard of "Hard Money Lenders". If not you can check on the "Lenders" tab on the menu of this website. They are a category of lender that is very useful for investors.
They typically lend 65% of the AFTER REPAIRED VALUE of the house.
So if you are buying a $65K house that will be worth $100k after repairs they may lend you the entire purchase price.
If you can get your purchase price down to $50K, they may lend you the whole purchase price and put the extra $15k in an escrow account. YOU will need some of the money to start repairs (so you may still need to partner for your first one or two of these), but as repairs are done and you can show receipts, OR work accomplished, they will distribute the escrow money to you.
Hard Money lenders lend based on the value of the home, and few care at all about your credit score. They fund quickly too.
The only bad thing about Hard Money is the interest and points are high. And you must pay back the loan within 1 year.
Usually by then, you are rehabbed and sold, or you could cash out refi to a lower interest loan and pay them off.
A Hard Money contact is invaluable for rehabbers without cash.
Good Luck,
Neill