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Updated almost 10 years ago,
Help me understand - is this viable process?
I should note I've been involved in real estate in 1 way or another for many years aND am now looking to get into the investment side of it. Is this a feisable option and process of a short/mid term Single family home.
I purchase a distressed investment property at approximately 30% discount ($200,000 valued property purchased for $140,000). Traditional bank financing is out, Being an investment and being self employed with low income after tax write offs, so I opt for private or hard money lending with an interest only loan as traditional financing is not currently available to me.
After rehab I now have 40% equity in the home (property now appraises for $233,000). Because of the initial wholesale price discount and the additional equity from rehab I then refinance with a traditional bank with a loan around 60% ltv so that I can then start paying down the principal. The reason the bank would grant this loan at this time is because of the 90k in equity the property has in addition to having a year or 2 of continous rent.
Help me understand if/where i got anything wrong or if there are other options available at any point in this process. Obviously this is a perfect example and numbers may be inflated, I'm just trying to make sure I grasp the concepts.