Buying a wholesale property

My investment partner and I just checked out a wholesale property today that we liked a whole lot and are looking to possibly put a contract on. The interest through one of their in house lenders is 13% w/ 3 points, and the price of the house is $144,900. Our total monthly payment would be around $2000. The investment trust said 9 out of 10 times they typically cannot do deals with conventional lenders. However I spoke with one of my mortgage broker contacts, and they said they could close within a week pending inspection.

It would be my first house and I would rather go conventional loan to save on payments. I am just curious to find out how long after we take on the HML can we refi into a traditional mortgage.

I am also curious how I can go through with a conventional lender if the power is currently shut off, and there is minor water damage from a small leak in the roof.

This may be my first wholesale purchase, so I am looking to cover my bases and find out things to watch and be aware of.

Any comments and insight would be greatly appreciated.

Also, over the phone the consultant we spoke with said that the company retians the title until the HML is refinanced or paid off. The way she said it sounded odd, is this normal? Wouldn’t they just transfer the titile, and forclose on the house if we defaulted on the HML?

what company are you talking about?

the company the property is owned through is called IItrust (intercoastal investment trust)

The lender is called Lakeside Lending LLC

The company has seemed somewhat open to traditional financing, which we are looking into currently. Another investor pointed me to a lender who can close in about 2 weeks. I am just not sure the criteria for getting an inspection and that going through.

Wow, you should definitely shop around, those rates are outrageous.

Just how much money do you have anyway? I think this could be done through a conventional lender. They will typically not lend on a property unless it’s in average or better condition.

I did a deal like this a while ago through a broker and we went through Chase. He had the leaking roof, non working bathroom, broken windows and parts of the house was missing siding. We did it through a “cost to cure”. Basically the appraiser said that it would take 25k to fix all that. They held back 1.5x that amount which was $37.5k. This money came from the buyer. We couldn’t have done this deal if he didn’t have the money. In the end, he got a conventional mortgage and at the time I think the rates were at 6.75 with no points. After fixing the place up, the money that was held in escrow by the attorney was released back to the buyer.

We have around 30k to invest.

With the hard money we could bundle the rennovation money into the loan.

However, a regular mortgage will save us 1/2 on our monthly payment, plus points.
I am just worried about something being wrong with the house and not being able to settle on time, and loosing my deposit.
However, as I said before an active investor I am friends with looked over the deal and said it looked great, and recommended us to a trad. lender he knows that says he can close deals quick in as little as a week or two. Hopefully this route will work out.

when you talk about a “regular mortgage” - what are you referring to exactly?

if you’re purchasing as a non occupant - investment property - conventional 30 year fixed is out. you’ll be looking at a commercial loan - most likely 20 year…but in this day and age, you might be able to shop for a 25 year term…the interest rate of 13% is very high.

HML, you probably are looking at an interest rate of around that area though.

i know Bluefield is like around 14%, but those are “rehab loans”.

and when you say “wholesale property” - what do you mean by this? if you’re buying it at a wholesale price, that 144k price should be at least 20 to 40k below what you could turn it for quick…IF you’re buying it as the wholesaler - meaning, you’re contracting to buy it at 144 and shopping it to other buyers at 164k for a 20k assignment fee.

if you’re actually going to buy it and close on it at 144k, that’s fine as well. from the looks of your post, it seems you want to rent this out. but the REAL VALUE of the property should be a SOLID 20 to 40k over what you’re paying for it.

rethink this prospect carefully.

We are buying at a wholesale price, and yes it is priced probably 25-30k below current market value.

We decided to go with the HML, for now. We should be putting the contract in on Monday pending a termite inspection.

The only thing I am trying to figure out is if we go HML, and then refinance after 6mos, will we still be able to qualify for 1st time homeowners incentives, or will the refi with the traditional lender count as a 1st time homeowner loan.

Thanks for the input!

if it’s an investment property - you won’t get that type of financing.