Will this work???

Okay, this may be a dumb question(s), but here goes…

I looked at a house yesterday, and here are the numbers as best I can tell.

Single family house
list price 102,900.00
ARV 120,000.00
cost of repairs 7150.00
carrying costs 3000.00

I would not purchase for more than 96,850. I rounded WAY up for costs, and figured 3 months worth of carrying cost (just in case!). I have seen comps for the neighborhood, and would actually list at around 117,000 after repairs were done, to sell fast. So, If I am correct, this is what the end result would be (giveb the estimates don’t exceed)

ARV 117,000
profit 10,000
repairs 7150
carrying 3000

highest purchase price= 96,850

Now, my question is, If an HML will loan no more than 65-70% LTV, then am I correct that I could not get a loan to cover the purchase price as well as costs to repair, etc???

There are a couple of properties that I would LOVE to do in this area, and the numbers look good to me. My problem is that I live in a small community, and I don’t know of any HML close to here, and now I am afraid of not being able to get the financing (I have conquered EVERY fear I had about doing this, except that one…) With a 560-600 FICO, I don’t want for this to come to a hault for me before it begins…

I strongly recommend you avoid your initial purchase using your own credit. There is a lot of valuable information on this forum where you can learn how to acquire a property subject 2, either with or without the use of a land trust. Good luck.

I am not sure where you are, but in California there has been a slow down in moving properties. I am now planning on carrying flips a minimum six months. If it sells sooner, great. Depending where you are your margins may not be as tight.
Good Luck,

Every place has its own market Its important before you get too involved to determine your market conditions and move from there. For example in my area I know that about 55% of the people in my “valley” rent and I know that there is a Lowes moving into town, the Wal-Mart is expanding and the local hospital is in the process of adding a new wing, and staff to go a long. My town is moving away from career factory jobs to lower paying short term jobs. I can deduct from this that the percentage of tenants will stay the same or even increase over the next few years. So my personal strategy will be to buy at a reduced price, rehab, and sell to buy/hold REI as well as add some buy/hold properties to my own portfolio.

If your market is really slow, 6 months or more, consider creative types of selling. MntWizard mentioned sub to and lease options. I read somewhere that 60% of people who apply for traditional mortgages to buy homes get turned down, they are still looking for homes. Why not offer owner financing? Thats a whole new market of people to tap.

if you list for $117k, you are not going to get $117k in most areas, plus you have selling cost, etc.

Also to sell in 3 months, you have to have it under contract in 6 weeks or less after list. It needs to be a HOT market to do that (or list at a super deal price)

I think you will be lucky to break even.

Thanks for all of the replies!

I am about 100 miles south of St. Louis. The neighborhood that the property is in has an average of 6-8 weeks on the market. This one has been listed for almost 3 weeks.It’s an older neighborhood (12-18 years), but the homes are “cute”, and they are building VERY nice subdivisions all around it (nearly directly behind it, and next to it).
In the beginning I was afraid I would be one that would wait forever to make my first purchase, but I’m beginning to believe that I’m just itchin’ to buy one… :slight_smile:

Dont need a deal so bad that you get a bad deal. Its all about the numbers because they dont lie. Good luck and keep posting :wink: