Hard Money vs. Private Money -- Scenario

[Steve M.]

Let me start off by saying BP is GREAT! When I wake up from a dream thinking about real estate, I know something MUST be good ...

Here's my situation. Would love to hear thoughts from some of the *locals* :D Thanks for any and all advice in advance.

Facts:
I have roughly $200k in Private Money (my own) to get started in REI. Mainly looking to Buy & Hold, starting with several SFR's.

Hypothetical Scenario:
Lets say I find a home.
ARV is roughly $150,00 - $160,000.
List is for $95,000 (short sale/fore)
Rehab: $5000 - $10,000
Rents: $950 - $1100

Now, I would love to close on something like this quick. Assuming I pay from my own private funds, I can than go out, and refinance for roughly $70% LTV. Is this correct?

Now, if I have private money, there really is no point in going with hard money only to refi later, right?

Just trying to work out some of the kinks in my understanding!

Thanks!

[Jon Holdman]

If you buy a dumpy property, and fix it up, you will be able to do a refi based on a new value.

There are a couple of gotchas.

You say private money, but you really mean its your own money, if I'm understand correctly. So you mean you're paying cash. You want to do the refi to get your cash back. Trouble is this is a "cash out" refi. Those are harder to do than a "rate and term" refi where you're paying off one loan with a new one. A cash out refi of a NOO (non owner occupied) property based on a new appraisal is probably the toughest loan situation. It may take a year's seasoning to make that happen.

If you were paying off one loan with the new one, it would be easier. One member recently described a strategy where he and a partner both had their own money. Instead of each paying cash for their deals, they loaned each other the money. That puts a documented loan in place, and makes the refi a rate and term refi rather than cash out.

Here's my jaded take after being jerked around on listed short sales. If there is a negotiated, agreed-upon price with the bank, that is, a price the bank has agreed to take, and that's a good deal, offer that price. If there's no agreement with the bank, its unlikely you'll actually get an agreement. If the owner is a homeowner in distress, you could try for the deal. If the owner is an investor, forget about it.

Do not provide earnest money up front. Give the amount of earnest money you will provide. State the earnest money will be provided in certified funds within 72 hours of the contract being accepted by the bank. The seller's signature on a contract means nothing. You only have a deal if the bank signs. So, don't get any money tied up in a deal where the real deal maker hasn't signed.