Newbie - what docs HML need?

Hi Everybody! :slight_smile:

I am new to real estate investing and this could be my first deal so I am really excited about it. I have located a property in Atlanta and am planning on getting hard money to buy it. After reading few great articles here I still have some questions about how it works.

I am self emloyed in a cash-and-carry business. My personal credit is not the best. From reading here I understand that HML is the best option for rehab. What documents do they usually require to get 60% to 90% LTV?

Most HML’s loan based on the equity in a property. And ussually around 70%LTV. As far as I know most arenot that concerned with the credit or position of the buyer just the property itself, J

Thank you for responding. ;D
The reason I’ve asked is because I’ve tried to fill out an online application for HML and they are asking SSN, credit score, bank statements, etc…
I have another question, probably a silly one… 70% LTV - does it ALWAYS mean loan to AFTER REPAIR value?

Most HMLs work off After Repaired Value, but not all. Many HMLs will ask for credit but do not pull credit. The loans are asset based. As determined by the ARV of the property.


Ok, here is a description of my possible first deal… ;D I’ve located a property in Georgia. It is a duplex, first unit 5 beds/2 baths, second unit 2beds/1bath. Owner asks 60.000$, willing to finance. List price is around 85.000$. Property is currently under contract with kickout clause.
I need an advice from someone with experience on how to go about it.

[]Should I use owner financing or HML? I’m not planning to keep the property
]In state of Georgia, can I do all rehab work myself or do I need someone with permits?
[*]If I use HML, do I make payments on loan itself or only on interest?

Thank you guys! :slight_smile:

Howdy Shotoclay:

You need to look at all the angles. How much cash do you have? Most HML’s want you to have some cash in the deal. Mine will usually let me get away with less than most but the deals are below 65% LTV. The rates that HML’s charge is around 14% so if you can get financing elsewhere cheaper you would be better off getting other financing.

How much down payment does the seller want if they finance and how much rehab does the property need? If you have enough cash to put up or can borrow it from a family member or friend then this would be the way do do the deal.

My lender just charges interest on the money loaned and collects monthly. They also have a minimum of 4 months and usually collect this up-front giving me 5 months to rehab and resell the property before the first payment is due.

You will need permits to do a major rehab. You can do painting and carpet and minor rehab yourself without permits but when you start moving walls and plumbing and major overhauls you will at least need licensed plumbers, electricians, and HVAC mechanics. You should check with your city officials to learn all the details in your area.

Hope this helps you decide what to do with the property. You can always rent the rental units when the rehab is complete to help defray most of the carrying costs until you can sell it to an investor. Keep in mind too the closing costs to buy and sell including commissions and points to the hard money lender.

Hi, TedJr,
Thank you for information, it definitely will help. Especially since I’m planning to deal mostly with multi-famiy units and plan to rehab and rent. Question, at what point can you list property for rent? I mean, is there an inspection code for houses and if so, where can I find that for state of Georgia? And if rehab is major, can I, as an owner, still live in the property even if it’s in really bad shape?
Thanks again

Howdy Shotoclay:

I do not like to show dirty units that are not rent ready unless I am looking for filthy tenants who do not care what a place looks like. Certainly do not rent as is with the idea that the tenant will fix it up for the deposit. Most of the time you will end up kicking them out and finishing the repairs and have gained nothing and in fact lost money in the process. If you have several units you can get a model ready and show it or get the best 4 or 5 units ready and rent them and then do a few more at a time. I am in the process right now doing exactly that. I just rented our first unit and will finish another today and several more by weeks end. Because the units are clean and ready I am getting $50 per month more than the old ugly dirty units. That is $1550 per month more for 31 units which will add $180,000 value to the building at a 10 cap rate with the expenses being the same.

If you can get utilities you can live there. Folks live in their home all the time when doing major rehab. I do not imagine Georgia to be different.

Go Bulldogs and Braves

Hi TedJr!
I guess since I am complete newbie, I get pretty nervious thinking about doing something wrong, especially when it comes to tenant rights and getting sued. :slight_smile:

So, pretty much as long as I am willing to deal with propertie’s problems, I can live in it. The reason I asked is because I am workng with a real estate agent in Atlanta and she asks where am I going to lie during rehab (?) so it got me a little confused… :slight_smile:

Thanks again for information!