I have placed under contract five, three bedroom, single family brick homes in a great community in Detroit, Michigan, Rosedale Park.
The package has an after repair market value of $520k (Checked with 2 different appraisers)
The total purchase price for all five homes is $117k
The construction cost is $116k
Projected Profits $200k
The idea is to sale the homes to homeowners via FHA at 97% LTV. We currently have an approval from Quick Funding for 60% of the after repair market value. However, here is where we have a problem, there is a due diligence fee of $8,750. Because we have placed EMD’s on the properties we do not have the money for the due diligence fee. We are currently looking for investors that can assist us with the due diligence. We initially where offing $19k in returns in their money, we even offered to split the profits with them. However, we have apparently not been talking to the right people, have not had any luck as of yet. At this point we are considering (bird dogging) flipping the properties to another investor and maybe just getting $3k to $5k for each one.
Everyone is ready to go on this project once we get past this problem…….
Please if any one can help with any advice I’m looking for any and all suggestions
Never thought I’d see the words “great community” in the same sentence as “Detroit, Michigan.”
Have you tried signature loans, selling stock/mutual funds, etc to raise the money?
I would be very leery of paying someone $8,750 to loan you that money. That sounds like a bad ending waiting to happen. If the deal was ready to go I would ask them to put the closing funds in escrow and then MAYBE send them the check for $8,750 but what happens if you send them the funds and they decline your deal? Or can you pay that money at closing? As if it was a closing cost?
While I was looking for HML’s that up front fee is another thing I kept running into. There were a few out ther that wouldn’t even look at the deal unless you accompanied a check for $5k-8k. Thanks, but no thanks.
Paying upfront fees other than appraisal and possibly for the enviromental survey for a commercial loan is a bad idea. The lender does not need upfront fees just to review your deal.
Im guessing the reason for the 8750 is because its a few properties together which is not that uncommon, this is not your straight forward LTV SFR deal. however I too would be very cautious in this case due to the area. You don’t want to hear “sorry the property values have dropped” and then be out your money.