Just bought a property for $8K cash, ARV = $65-$75K; Tax value = $55K, property is in poor shape and will need $25K in repairs (foundation support for sagging floor, siding, roof, kitchen cabinets and tops, flooring thoughout - carpet and linoleum, minimal landscaping, 15 windows, new front and back door, interior trim and paint). I own a remodeling company and with the exception of the foundation work, we will be doing the repairs ourselves.
Although we have the money for repairs, being that there is no mortgage, I was wondering if we should get a $35K HELOC on this property to cover the repairs. Anyone done this before? Are banks willing to give a HELOC on something like this (i.e. - property in poor shape, decent neighborhood, no mortgage, etc.)?
in today’s mortgage market i think it will be very difficult for you to get a NOO HELOC. You may have to pay for the repairs out of pocket and then refinance the entire property into a cash-out
Unless you’ve got a really special relationship with a lender (i.e., your brother is the loan officer) I think you’re going to have a tough time getting a lender to take that deal. I think you’re better off going into your pocket for the fix-up funds and then cashing it out when you finish the project.
If you can swing it that’s the way to go. You’ll save money in the process and turn a bigger profit. Since making money is the name of the game it’ll put you ahead. Plus you can stick your savings in your gas tank or swing by the financial district in New York City. I hear there are some very well dressed people on the corner looking for loose change
Seriously, you’re probably better off not trying. The banks already have more REOs than they know what to do with. They really have no interest in loaning money on something that could potentially just get added to their inventory AND need repairs before it could be sold.
Have you ever considered a credit card with those checks to cover rehab costs? They start at 4% and go down from there. Now I realize you will take on extra debt that will mess with your DTI. However if you can do these property repairs yourself and save money, you can pay off the debt later with a refinance and still clear a little between the FMV and what your basis is in the end.
Besides carrying a 25K loan over 1-2 years at 4% should be covered by the rental income or flipping it out to another investor should cover those carrying costs.
Unless you have a relationship established with a smaller fin. institution (i.e. local bank or credit union) - your chances are slim to none.
Let’s say it is possible - then it may take you 30+ days just to get that accomplished. If you’re gonna keep the prop start working on refinancing into conventional loan - as soon as the repairs are complete, so you can try to cash out.
If you’re looking to rehab and re-sell the property - don’t bother with HELOCs or other type of fin. against that property.
In the current market, no lines are being issued on rental properties. Especially ones in need of major repair. Try your local credit union, they may do it but slim chance.
I would go after a personal line of credit that you can use over and over again. Just be sure to work with a repputable source. This is a great time to do many deals like the one you have tallked about. Just set yourself up right, right from the beginning.
