I am working to complete my business plan and I had a question. My plan involves buying a rundown property, fixing it up and selling for a profit. I will then take this profit and buy another property below market value and use the profit from the first property as a down payment so I know I will have an excelant cash flowing property. My problem is will the bank still want to give me the loan if they know that i am going to sell this property and be paying off their loan in 6-9 months? or should I just put in my plan that I intend to to hold on to this property long term as a rental and sell it after rehab anyway? Hence , this is my plan but not really my plan kind of thing.
The bank isn’t necessarily going to care if you pay off your loan early.
- However*, make sure that the loan you are getting doesn’t have seasoning or a prepayment penalty.
You might pay a higher interest rate for that, but it will work out to be much less than paying a penalty when you sell (if you hold the mortgage for a short time).
With a short holding period, you might have to consider going with a hard money lender.
There are programs that I am aware of that reward investors for early repayment (hard money loans don’t come with a prepayment penalty); you could potentially recieve between 1-2% of the loan amount rebated back to you.