Should I do the deal ?

[Sharif Khalaileh]

So I’m new to the whole Real estate game. I have a Property that my parents donated to my wife and I, and the property is paid for but the house needs a whole new renovation. Like the whole nine yard. So I have a client that is a Contractor and is willing to do the whole job for 15% on top of the total Renovation cost which I will need $80k to fix. So I tried to go to the bank and take out a loan but they need to have the property fixed to have some value to it in order for me to get a loan. And the amount I show on my taxes doesn’t help either. So the contractor knows a hard money lender that is willing to help me fix the house for me so I can Qualify for the loan. The lender is gonna charge me 10% to use his money. So in total I will be asking the bank for a total of 100k. And my house will be worth from $170-$200k. And whatever left in Equity I can use to start in the Real state business. Use I do it ?

[Frank Wong]

Hi Sharif,

Is the house in such poor condition that a bank won't lend on it? So based on your numbers the ARV will be $185k the avg of your price range. You will need to get a hard money loan for an amount of $100k. You will also pay fees and interest of 10%. So after you complete the project minus the interest and points paid to the hard money lender you may have $72k or so in equity.

Have you thought about just selling the house the way it stands and pocketing the money?  It might be the same amount.  This way you don't have to go through all this hassle, time, and risk trying to do this rehab yourself.  If this rehab goes wrong you will lose a lot of money.   

The investor who buys it might vale the house higher, may rehab it less than 100k and don't need a hard money loan.  So they might even pay you more for the house.

Just giving you another option.