I’m looking to purchase my first deal for 5k a reo property rehab with a arv of $65000. My exit strategy is to buy fix and rent for cashflow, I’m going to need about 25k for repairs I don’t have good enough credit for a bank loan. I’m looking to get any good advise on how to finance this deal. Some hard money lenders don’t lend to the area that I’m buying. I need help
Why don’t HMLs loan in that area? If your numbers are correct then it seems that any HML would be willing to at least look at it. Are we talking war zone here?
You might just want to find a partner (joint venture) on this. Hard money interest adds up REALLY fast and you may find yourself in the negative if you end up holding the property too long. Do you know how long the project will take? Do you have a few exit strategies planned?
When you see gurus say that you can invest in real estate with no money down or no money out of pocket, that’s true, but it usually requires experience, and you should have reserve capital if things do not work the way you want them to.
I like VegasInvstr’s point that you should have multiple exit strategies such as:
- Can you fix and flip?
- If you end up losing money, can you still sell the place? Let’s say the total cash to buy, rehab, and carry a hard money loan ends up being 50K, you try to sell it and the most you can get is 45K. Can you come up with 5K difference and 3K in agent commissions and 1K in closing costs?
- Could you live in it?
If the end game strategy is to hold and rent, then my first choice would not be to use hard money. You could do everything right, and at the end of the rehab, your poor credit could prevent you from refinancing your hard money loan.
I think you should clean up your credit. I think you should save up a war chest of cash (at least 6 months of principal, interest, taxes and insurance for the target property) If this deal is too good to pass up, buy it with cash or a small, unsecured bank loan and fix it slowly.