I am excited to get started in REI and my goal is to buy fix and sell…my wife is very skeptical about me wanting to start REI…but she said go for it"don’t use our money" I know about the HML but I would like to know if there is a loan that would provide 100% financing purchase price rehab cost holding cost and allow me no payments for 6 months or will the rehab is being done…note most of the HML state that they do the reimbustment of what was spent and not accually finance the project. my credit score is around 700 and my income can not be a factor…Can any one shed light on my dalima…?
I have risked everything I own and my marriage to try to get ahead and do deals and trust me it will not be handed to you on a silver platter. It just is not going to be that easy. I put my wife’s wedding ring in the pawn shop and lost it after 25 years of marriage. I have been bankrupt 3 times and am coming back stronger than ever and risk it all every time. All the books and gurus that tell you how easy it is without money, credit, job, income, nothing at all are selling books and may be misleading just a little to say the least. A lot of them are talking about flipping where you just get it under contract and sell it without getting a loan. Even with a lot of these you need to be pre-qualified with a mortgage company. I am not trying to burst your bubble but just giving you a heads up that it is not that easy.
There are lenders that will do that, however, it will cost you. These loans are expensive in fees as well as interest rates. Do you have any rehab experience? What state are you in?
I would explore, with a talented mortgage broker such things, and look into The Stated Income (no proof of income required), 100% financing (nothing down) OptionArm products, they allow a less-than intrest only payment for 5 years some of them… Allowing you to keep the money in your pocket where it belongs, even if it creates some negitive amortization it could be a great move if your goals are inline with what it would take to avoide the pitfalls.
Another neat trick I have actually seen work is the simotanious second mortgage, in wich you begin to bleed your equity heavy right at the closing table douring the purchase. (walk away with a check). Be carefull and be sure you start with a Great buy, dont let these people talk you outta moving as this is a fantastic way to make money.
I personaly wouldent be affraid to ask for all those things you required above in a loan provided I KNEW it was going to be right back on the market the day I bought it (more or less) -that would be an agressive loan/manuver that I am sure the bank will make a killing on should you get stuck actually making a payment. Be sure to trust and inform your broker about your master plan so you dont get stuck with crazy seasoning periods and early payoff penaltys and such products of poor communication. And I hope you have a capital gains stratigy in place, when you sell a property you bought less than two years ago the taxes can hurt if you dont have a plan to eliminate them.
Redroom,
That was my question as well…I’m assuming you would only want to do these “no interest no payments for 6 months” (is there really such a thing?!) if you were flipping and not holding.
If you were holding a property you would have to eventually make payments and the interest would be sky high?
What would be a capital gains stradegy if you did have to sell before 24 months?
I have been investing for 10 years now and I know that you have to have all the help you can when you are first starting out
Just like redroom 1 said you have to know what your prepayment pentalies(PPP) are if you are going to fix and flip it would hurt you if you knew that you were going to sell in 2-3 months and you had a 6 mo hard PPP and then you would be stuck having to pay 6 months worth of interest payment to sell the home when you could have bought out the PPP for less money, (brokers get paid more if they offer you a 2-3 yr PPP so it benefits them not you so you need to know this.) Some lender do have a forced 6 mo Hard PPP so you would know that you could not sell the property with out a PPP until after 6 mo then it go soft then you could sell it will no PPP. this is typical for 100% deal the lenders want to recoup some of their risk by forcing the issue.
You will need to talk with some one about asset protection and capital gains issue I know the easy answer is after you close put it in an LLC well that is not the answer ALL answer.
Thanks for all the insight it helps there I thought i was pissing in the wind after tedjar’s comment…but even if I went 6months couldn’t I sell before the first payment was do like delay the closing the day after the 6month to avoid the ppp? I also had this idea what if I went to the local lumber company if it be home depot or a mom and pop store and asked for a line of credit for say $10,000 ok I take the $10,000 and do some repairs if I also had a HML in place to loan me the money after some repairs have been made and take that money and pay my line of credit…then sell the house and pay the HML…please comment
might not matter but I read some good advice recently.
It said to not do rehabs at first because you are a novice and would have no cash flow. If something goes wrong, you are left holding the bag and will get turned off on realty. Instead get some REI experience and then pepper in a rehab and go from there.
Sounds like great advice to me. From what I can tell, REI is like any business. Run it poorly and you will pay. Being an entrepreneur for over 13 years now, I have met hundreds of people who had a business that was good and with potential but lost everything because they ran it poorly and did not posses a business mind about matters.
Perhaps hitting some singles and bunting would be better than swinging for the fences on your first trip to the bigs–to use baseball as an analogy.
Just wanted to add that this quote by you:
“but she said go for it"don’t use our money”
Tells me that you are not ready for rehabs. What if you run into problems and need to use your own money? It is going to kill your household life since your wife is not on the same page. Do you even have money of your own? I am sure people like Ted can answer this better but without any cash in hand, I doubt doing a rehab is wise out the gate.
Perhaps a better solution is to spend time educating your wife more. Get her to the point where she “sees” the money and is very excited. Working in harmony is the best policy.
Sorry, did not mean to go Dr. Phil or something there
Thanks for all the insight it helps there I thought i was pissing in the wind after tedjar’s comment…but even if I went 6months couldn’t I sell before the first payment was do like delay the closing the day after the 6month to avoid the ppp?
Yes you could delay the closing to one day after 6 mo.
or you could just get a loan that did not have a PPP.
I also had this idea what if I went to the local lumber company if it be home depot or a mom and pop store and asked for a line of credit for say $10,000
Home Depot or Lowes have Credit cards that you could use and ask for the limit that you want maybe they will give it to you.
As far as a MOM and POP shop I do know if they have there own CC or go with Visa or MC
ok I take the $10,000 and do some repairs if I also had a HML in place to loan me the money after some repairs have been made and take that money and pay my line of credit…then sell the house and pay the HML…please comment
Well some HML will lend you money and they want you to pay for your repairs so that you have some risk in the home
others will lend you the whole amount and want some what of a down payment for a risk into the property
Others will do a 100% of the home and repairs it all depends
thanks for all the reply’s and I think ur right I’m going to pass on rehabs for now and maybe look into rental properties that are at least 5 units or something like that to were I can build my income at the same time…HOPEFULLY!
Well if you want to do 5 units or more you will be in the commercial lender arena and if you stay in the 2-4 units you will be in the residential guidelines and you will get higher LTV
because once you are in the commercial arean you are in the 90%ltv is max in commercial typically 80 % or below.
Islander,
I’m not sure what part of the country you live in but in Massachusetts the housing rates are so inflated that it is impossible to buy a property w/ zero or little money down and expect to get positive cashflow.
Maybe you have another way you could work this. I am learning too but from what i can tell if you can’t put enough money down (whether it be a HELOC or thru a 1031 exchange or just cash) then your payments will be so high you can’t cover the mortgage, taxes, insurance, and repairs.
Islander,
Here’s an alternative & safer way to accomplish what your’re trying to do to get started in the business. Find someone with EXPERIENCE AND INTEGRITY who will do a “participatory note” with you. They arrange or provide all the financing and are involved in the rehab and resale on a passsive basis (depending on the terms of your agreement). Make sure you put EVERYTHING in writing UP FRONT. Typical terms are a % of the profits and a fair amount of earned interest taken off the top.
Thanks to all who have replied. ok found a 5 unit complex all but 2 unit has been remodeld and rented out. asking price is 250,000 each unit is rented for 525 on a year lease. mortgage lender said my payment amout would be 1850 and the ins would be around 250 month and taxes are also about 250 a month.(each unit is 2br 1 1/2 bath)
total needed for fixed payments = 2350 total rent = 1575 this = -775 monthly
being my first investment and stating that i’m renter myself i would live in on of the units. I currently pay 900 month take that and apply to -775 this would save me 125 month of my money…would this be a good investment…( I have to have some place to live)
so lets say I rent 4 of the 5 using the 5th as my home/(no income or as a vacancy)525*4=2100 - 2350 = -250 so it would cost me 250 to live rather than 900 SAVINGS of 650 (Note I work full time and I would live on the property and manage it myself as for repairs I could use the 650 that i’m saving each month)
I plane to buy and hold (rumer has that casinos are comming to town in the near future here on Galveston Island TX)
the rent rates of 525 are below the market by at least 100
how do u figure the value of a property with out a operating report?
please help
Well You will have to be treated like this is a brand new Apartment complex that has no history because it was just built
So when you do an appraisal the appraiser will do a rental history of rents in other complexes (kind of like what the do with Comps) and then they will calculate what they will think the GOI and NOI and then the commerical Lender will look at these figures and will calcutate the Cap rate which you will hope that it will come in at 12-10%.
The discount rate used to determine the present value of a stream of future earnings. Typically this will be an appropriate risk-free return plus a premium to reflect the risk of that specific investment.
Definition 2
In real estate, the rate of return on a property.
If you want to learn any other terminology go to this site it is really really good
I would like to say thanks for all the replies and I think I got on to another subject you can continue the replies in the rehabbing and Landlording newsgroup forums…Once again thanks a bunch
