After I get my money to do my rehab, is there a checking account or somthing that I can put that money into that will collect interest then I can write the checks to my contractor as I need to and get interest?
Check with your local lending institutions. There are many types of accounts and programs available. Sometimes the small local banks have better programs than the larger ones and are more willing to customize.
Another question- Is anyone else personaly doing what I described and how does it work out for you?
I think interest bearing checking accounts aren’t as common as they used to be, but they still exist.
Home Federal, out of Idaho, has a 3 % interest checking account.
I haven’t asked, but money market checking accounts are probably still available. US Bank used to offer a really good one. Maybe they still do.
I wouldn’t get too wrapped up about trying to get interest on that money. I’d be more concerned with getting the rehab completed efficiently. I don’t know what kind of numbers you’re talking about for your deals, but a couple percent interest probably isn’t going to amount to much.
I am looking to borrow upwards of about 150k. I think collecting interest on that might not be a bad idea and it might help cover the cost of the hard money.
I am with justin0419 here. How long do you anticipate the money being in the account? These accounts pay 0.97% annualized. If the rehab takes a month or 2 and you are talking about $150,000 then that is maybe $100 but if the money is in the account then you are sitting there looking at an unrehabbed house. Instead of looking at making $40,000 on a rehabbed house you are worrying about making $100 on the money in an account. As soon as that money hits your account I would guess you would be buying materials and appliances and paying contractors. That means that it won’t matter how much interest the account was making because the money is not in the account long enough.
Since most of these accounts require $10,000 in the account you will end up paying $20 monthly fee. That would be $100 in and $20 out. Don’t lose focus doing something as mundane as trying to sell the house you just rehabbed and forget to close the account once the money is out of the account for a month or 2 and all the interest you just made will be gone in fees.
My advice rehab the house and make the $40k and forget about the interest.
Just offhand the type of account I believe you are looking for is a Money Market account.
These generally have check writing privelages and also carry the highest interest rates of most accounts.
It depends how many checks you plan to write though,as they have a minimum balance and also you are limited to X amount of checks per month.
For the highest rates check out a money market with a mutual fund company,they trend a small bit higher than banks.
Typically with a construction loan you don’t get all the money in one lump sum. They approve expenses from the loaned amount and the loaned amount increases as you draw more money. So let’s say you take out a loan for 150k. the first month you have no bills yet and don’t owe anything. The second month you pay out for concrete and excavating, so you only pay interest on 30k or so. It’s actually better for you than what you propose, because the interest on a construction loan will be more than what you can get for a checking account.
To answer your question though, my local bank has 5% available but there are qualifications to get the 5%, like debit card transactions and minimum balance requirements.