Looking for HML for a rehab project with a 55% ARV. We’re ready to close (lined up closing atty who has done title search). Figures are:
290k sales price
125k rehab
ARV 750k
If you can move fast, and can make a loan based on the equity, please let me know. Also, I want to run this through my LLC if possible. Everyone says this is a “no brainer” but they don’t follow through. I don’t want to lose this deal.
What have some of the issues been that have come up on why they wouldn’t loan?
Most HML are 70-75% arv. Rehab funds put in escrow and are there for reimbursement of work completed and inspected? Do you have some working capital or a flexible contractor?
With your low ltv you should even be ok to get payments rolled in.
What is your exit strategy?
I’m planning on rehabbing and reselling the property. This is a real hot area where people are buying older homes for $100/ft, fixing them up and reselling for $200-$225 sq. ft. However, the renovation has to be top notch–granite, hardwood, sub zero…
I contacted four national lenders from the HML listings on reiclub. Two said they don’t really like to lend in TN but they just listed that state anyway (WTH?) One I sent the application, but it takes “at least two weeks” I finally located a local broker that “does these all day long”. She said this would be easy because of the numbers, and has 200 HML lenders (what all brokers say) to choose from. This was Wednesday they still haven’t gotten approval. If I don’t close soon, they will foreclose on this lady and I’ll lose the deal.
I don’t mean to be down on brokers, but it’s frustrating when they make all these great claims about what they can get for you then start backing off when you present a deal that matches their funding assertions.
Where in TN is this? If it’s in the Memphis area, I might be able to get you in contact with someone the local rehabber’s use.
I know of 2 lenders that might work well for you but like I said they only give out rehab funds for reimbursement of work completed.
You never mentioned if you have enough assets to start the project or a flexible contractor to work in phases.
The majority of hard money lenders that include rehab funds in the loan will be 2-3 weeks. If you find indvidiuals with private funds they’ll work a little quicker. Lenders will typically want to have a suject to appraisal done based upon the list of repairs you have given. That and title can be some of hold up.
If you’d like to get in touch, I can share more of what I know with you and get you referred over to them.
This is in the Nashville area. Draws are fine. We’ve got good credit with Lowes and HD and have lined up a remodeler that is used to working with the rehab draw process.Title search is completed. The homeowner had an “as-is” appraisal done recently for 469k. This house needs $125k in repairs and updates to achieve the $775 value. We have good comps.
Title search has already been completed. Like I said, all we lack is funding.
All sounds good.
I have a quick question Gator Girl. In the first post you said the ARV was 750, now you are saying 775. Just want to point out that this might send up serious red flags to lenders.
Go to a lender directly, they will order an appraisal. We use MAI certified. They will give both as-is and ARV appraisals based on the repairs to be made in the project.
But if you want it, you have to go get it.
Here is a little quote for ya:
“Good things come to those who wait, but only the things left over by those who hustle.”
Sorry–my typo. Actually, the comps of remodeled houses show a range of $180-210 sq. ft. This home has 4100 square feet with a 600 sq. ft. apartment over the garage that just needs HVAC. I have been using the 750-800k range because that is a conservative estimate of what the ARV will come in at.
I think you’ll agree that whether it’s 750 or 775, the numbers still work!
Hey Gator,
IS it a possibility of writing the contract at 430k doing an 80/20 with the second 20 being a sellers held and the funds being put into an account for your rehab. Have the home owner tear up the second and walk away.
AndyG.
Sounds creative. I just neede something fast before the bank forecloses on this woman. I like the 80/20 idea but it seems like a longer process.
I’m in the midst of buying a personal home right now, so I wanted to keep things simple. I don’t need a 420k mortgage showing up on my personal credit while I’m trying to buy an 800k house.
gator
You’ve indicated several times that time was factor.
How come no initiative to reach out to others who could possibly get you going in the right direction?
Using this advice under a conventional loan would absolutely be considered loan fraud if not disclosed to the lender. Conventional lender’s do not allow “throw away” 2nds so disclosing will get a denial.
If private/hard money funds are being used then there’s no reason why the seller can’t TRULY hold a short term 2nd mortgage note which would reduce the ltv and exposure on the 1st. Although the ltv on this deal already seems low and should be doable as is.
It can get disclosed and a contract put in place. If its listed on the Hud and is there at closing, nothing fradulent about it.
I don’t need a conventional loan with a prepayment penalty. I hope to renovate and resell in three months.
Surely you dont think that a conventional lender will approve the loan when you tell them that the seller is going to “tear up the second and walk away”. That’s just not going to happen.
Look. I’m staying out of this conversation guys. If you two brokrs want to hammer out ethics that’s your business. I was just looking for a 55% ARV rehab loan, that I want to run through my 13 year old LLC
Thanks…
Although this was your thread, other investors reading deserve to hear what lenders will and will not allow. Those are legalities that we’re discussing, not ethics. I’d hate to see somebody off this board steered the wrong way.
I’ll make this point one more last time too…you are looking for a loan which should be doable. Are you having problems getting in touch with those who have advised they can assist you?