Hi, I’m new to this forum and to REI. I am very impressed with the people on this forum, I finaly came across a place where I’m actualy learning. I’m still trying to figure it all out so please bare with me.
I have about 10k saved up to invest but I’d like to know what my options are if I don’t want to use too much of my own money.
I have bad credit. No Bankruptsies or anything I just know banks will not lend to me. I’ve been looking into Hard Money lenders as an option but am not sure if it is a good idea for a new inexperienced investor. Any help would be awesome, my questions are:
Is Hard Money a good route to take for a new REI if I have bad credit and no other resources to get cash and little experience?
Do Hard Money Lenders loan you the full amount of money to purchase a property as well as the money to fix it up?
This is probably a silly question, can anyone explain to me how purchaseing a property works like borrowing to buying?
Hard money lenders are the way to go. Due to your lack of experience you may want to hire a mentor or get a partner with the experience.
HML usually loan 65 to 70% of the after repaired value and this % can be used to purchase and do the rehab. It has to be a bargain to get close to 100% financing and you do not want to have much more than that invested in the first place because of the carrying costs and sales expenses. My HML requires me to have 5 to 10% cash in the deal.
Here is a simple answer to your silly question: Find a motivated seller and get a contract signed. Order the title report when you take the contract to the title company. Hire an inspector to look over the property to identify mechanical problems. You will also need an appraiser to give you the after repaired value. Make sure the appraiser is approved by the lender beforehand. The lender and appraiser will want a detailed report of the repairs the property needs and a cost estimate. Figure all the other costs too to make sure their will be at least $10K profit doing the deal. You will want to do this asap even before writing a contract to buy the property. You will also want to get your own comps and try to figure the retail value of the property before hiring the appraiser. I like to figure low and have the appraiser surprise me with a higher value than I figure. After the loan is approved then schedule the closing.
One other way is to partner up with an experienced investor. You usually split the profits depending on who contributes what. I’ve been a cresit partner with some investors & the front the down & we split profits 50/50
A mentor is a good idea too.
