I’m looking at properties where the cost to purchase and rehab would be under $50k. I’d like to borrow the purchase and rehab costs. I plan to hold them and use them as income properties.
My FICO is in the 620’s. I’d like to put as little down as possible but the FICO hurts that. I’d be happy with 90% ARV. I can do full doc for the 1st 2-3, then it’d be best to go stated so I can aquire faster.
Anyone have recommendations for smaller loans like this?
Most hard money lenders have a minimum loan amount. You’ll probably be under the majority of their limits. However, they may consider putting several properties together under one loan.
The only problem that leaves is finding the refinance since hard money is short term.
A conventional lender would not be able to refi them individually because of the loan size. A bank may be able to put together a blanket loan for mulitiple properties.
Nate’s suggestion of contacting a bank was good. Speak to the commercial lending officer. Start there to see if you can get the rehab and long term financing. If they cant do the rehab at least see if they would refi the hard money loan.
Being at a low ltv and having properties that cash flow will be a big plus at the banks.
I was thinking about this more last night. I have enough cash to pay cash for the 1st one (purchase and rehab). Then once I have it cash flowing wouldn’t it be easy to do a home equity loan to get 80 or 90% of the ARV out of it? Home equity loans have far lower transaction costs than a traditional mortgage or hard money lender.
If my costs were only 65% of ARV, then I’d be getting 15-25% of ARV as capital for the next one. It’d be a little slower aquisition speed than borrowing to buy but it’s also makes financing fees much lower.
For me…my personal opinion…is not to do this. I would rather keep the liquid cash in my pocket for suprises, holding costs, closing costs, etc. I use the banks money to finance my deals. Plus the cash looks good to the banks so if something does go wrong they know you have funds to cover. Plus in your first post you stated you wanted to aquire properties faster. Get in good with a broker or a local bank, build a relationship, and they will loan to you over and over again without using any of your money.
i did exactly what your saying bought house 25,000 from o/o and fixed it and refinaced in a month with chase bank with an equity line. problem is ins. and taxes not included in that and an equity is a variable rate and went up after 4 months. true no closing costs nor appraisal. i wish i would have got a regualr mtg took my money put in business account with ins and taxes incl in payment. would have been easier to keep track of cash…next time. good luck!
Yes we do have a branck in Appleton. As far as fees being high its a matter of opinion. This isn’t a conventional loan its hard money lending 85% of ARV and up to six months of payments escrowed in. Essentilally the borrower, in most cases, will be able to walk into a property with nothing down. Were not going to do the loans for free. We currently service about 60 million in this industry.
Loan amount is going to be a max of 85% of ARV(after repair value) so if the future ARV is 150k then your max loan amount is $127,500. Our fees would be about 7k and we could also escrow in up to 6 months of payments as well so you don’t have a payment on the property for 6 months. The overall term will be on a 12 month interest only note. Rate being anywhere from 11.99 to 14.99. In most cases we have room to roll in all fees, rehab costs, 6mo payments and the purchase price. In your scenario you would be short unless you lowered your rehab costs or negotiated the purchase price down. I hope that answered your question.