Group,
We are looking at the following:
6 unit package - a duplex and 4 single-family homes
Gross Rent - $2200 with no utilities
Sale Price $120K
ARV - $150K very conservative
Seller will take a $60K cash payment and finance the balance as a second DOT at low interest/payments with a 2-3 yr balloon.
We have 4 years experience with 30 units currently. Credit score is 570-590.
Where would I find some legit hard-money lenders that will do this one in WV?
Rick S.
You use the term ARV but list nothing about the rehab costs. If you’re using a lender that works off figures based upon a future value they’re gonna want a break down of the work and rehab funds will need to be escrowed. From the looks of your deal having to add in any rehab costs will make this even less attractive than it already maybe; minus the seller second.
If indeed no rehab work is needed and you meant ARV is the actual value with no work, then finding a HML 1st could be possible.
My concern though is that it sounds as if you plan to hold for awhile. HML are short term, 6 mo. - 2 years. Are you prepared to make monthly payments at a rate from 12-15%?
I’m based in Morgantown, if you are in this area I can help out, but based on the fact that you’re buying 4 SFH and a duplex for 120k I find that virtually impossible. Local banks are probably out of the question because of the low scores. Still, I know a HM guy in MD who will fund deals in WV at 65%.
I agree with Ben. The holding costs on the properties could be in the vicinity of $1400-$1500 per month based on a 15% rate on the first 60K plus a favorable rate on the sellers 60K second plus taxes based on a 1% tax rate and insurance set at $20 per property (probably very low). That does not include management costs or any other numerous costs that go along being a landlord.
The other thing is that you are buying at 80% LTV which does not leave you very much room in turns of profit. Closing costs and realtor fees can eat up quite a bit of profit at closing and heaven forbid your property loses value.
This deal might not be quite a deal after all.
Sorry for being a little vague. Let me clarify some numbers here:
current gross rent on 4 single family homes (HUD tenants) - $1850
market rent on duplex and garage that needs renovation - $1200
TOTAL -$3050
Duplex needs $30,000 in rehab
Seller will take $60,000 down and give a 2nd DOT for $60,000 with a 3 year baloon payable at $450 per month.
We are looking for $90,000 (rehab plus seller down payment)
Estimated Expenses
$1,150 - Interest on $100K (includes hard money fees, etc)
$450 - 2nd DOT to seller
$400 - Insurance & Taxes & Fees
$2100 - Total
A Conservative ARV on these properties would be $160K. Our exit strategy is to refi within 2 years. Currently we are at our limit with our friendly home-town bank (1.3 Million) and are working on selling some properties. I’m a licensed contractor and Realtor if that helps.
Thanks in advance for any advice and input.
Rick