Going To Make The Leap: Funds Struck Help
Rick TurmanPro Member
Flipper/Rehabber · findlay, OH · Member since 2015 · 118 posts · 46 votesGoing To Make The Leap: Funds Struck Help
10 Replies
- 10yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
FHA has a program called the 203K loan, where you can roll the costs of the rehab into the loan. There are, of course, strict requirements, so talk to your lender to see if it's an option for you.
It sounds like you need a loan fast - did you make a cash offer? I've never gotten a 203k loan before, but I imagine they aren't fast.
Why did your HELOC fall apart? Can you cash-out refinance your house?
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes10y
Originally posted by @Mindy Jensen:
FHA has a program called the 203K loan, where you can roll the costs of the rehab into the loan. There are, of course, strict requirements, so talk to your lender to see if it's an option for you.
It sounds like you need a loan fast - did you make a cash offer? I've never gotten a 203k loan before, but I imagine they aren't fast.
Why did your HELOC fall apart? Can you cash-out refinance your house?
Mindy-
Great suggestions!
To your point, actually you can get a 203k loan complete in as little or equal time as any other conventional means of financing. Its all about the team:
1) Use an experienced 203k lender, not someone that has done (1) or (2) just google 203k lender for your immediate area, call (3) get best rate, listen to experience pick (1)
2) Its all about value, in some cases you can go 110% of appraised value, giving you more money for your renovation if you need it, depends on your situation and market. Be REALISTIC!
3) Find a qualified and experienced contractor, do not settle for cheapest, you want experience here, because their is a significant administrative burden not only paperwork, proper formatting, but also financial constraint on the contractor as these sometimes have $0 prepayment to contractor. Keep it simple, search the 203k contractor database, you wildlife one in your area, call a few then pick best one.
These are the basics if you need more help send me a private message, happy to help.
- 10yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
Thanks, @Steven Gesis. I haven't ever used a 203k before, I just assumed they would take forever since they are a government program.
- Flipper/Rehabber · findlay, OH · Member since 2015 · 118 posts · 46 votes10y
Thanks guys!
@Mindy Jensen & @Steven Gesis,
The HELOC decision was on my father in law as he was all for our en-devours until the what-if's struck. In laments terms, he stated show me 2 or 3 successful flips, and I will invest. Very disappointing, however I completely understand.
There has not been any offers yet, Just trying to have my team and my financing together in case I strike a good one.
I have an awesome Agent who has found great properties and he actually found me our prize winning Contractor this week. He is licensed and insured and was working at my agent's neighbors house on a kitchen remodel. My agent new I was looking for another team mate and exchanged contact info, and the rest is history, well so far :-)
He came from the Fresno CA area managing over 1000+ rehab homes for a company and recently moved here about 3 years ago. While living here in my area, he has increased a rehab company's profit margins from 20 to 47% while working there. Now he has his own practice and is bringing the Building code to our area as a guideline as our area has no code!
Now for the fun stuff. I read about 203K in J. Scott's books. From what I understand, with this type of loan is I believe you need to live in the home post renovations, and they will provide the additional funds for the renovations included into your Loan. This is a huge benefit to those that are looking at Multi-family homes. Buy the house, Reno then Rent out, or Rent out 2/4 units, move into 1, while you move tenants around to renovate the others etc.
In our situation, I am trying to have a nest of funds available so I can start. I am walking 5 properties next Tuesday, which a few just hit the market Yesterday. If I like what I see, I want to take the leap.
I think what I need to do at this point, is go to the local Banks and just listen to what they have to offer in my situation. I may head there here in a few to gain more knowledge. Is there anything I should refrain from asking? Do they need to know the LOC's will be towards Investment properties or could I tell them i'm using it to start a used make-up collection business (That was the first thing that came to my mind for some reason not that I would ever go in business for that haha.)
Long story Long, thanks again for all your input. I have come a long way with everyone's knowledge and help!
- 10yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
@Rick Turman, I would never advocate misleading the lenders as to what the funds are going to be used for. Maybe not volunteer the information, but if asked, tell the truth. I'm guessing you'll be asked, though.
- Flipper/Rehabber · findlay, OH · Member since 2015 · 118 posts · 46 votes10y
Originally posted by @Mindy Jensen:
@Rick Turman, I would never advocate misleading the lenders as to what the funds are going to be used for. Maybe not volunteer the information, but if asked, tell the truth. I'm guessing you'll be asked, though.
Thanks Mindy. I am a very trustworthy individual, and would never do such a thing as misleading the lender. In my case, I would be up front with any plans for LOC's. Who knows maybe all will go my way and be in a better position than I would have been without. Again thanks for the advice, and looking forward to what lays ahead!
- 10yDarrin CareyPro MemberLender · Dayton, OH · Member since 2008 · 1k+ posts · 705 votes
@Rick Turman I need to run, but wanted to give you some quick answers.
203K is homeowner only, takes a long time to close, and must use "approved" contractors for all work.
Hard Money is expensive but can be done in 3 weeks typically. I've done them in as little as 5 days, and one right now is taking 6 weeks for an unusual property.
Local banks may help. They will want good credit and income from you.
If you're getting an LOC on your personal residence or an existing property, no one will care what the funds are for.
Incorporating is, or will be,important for you. In Ohio, it's pretty easy, and cheap to do.
You can issue 1099s as an individual if neeeded.
- Flipper/Rehabber · findlay, OH · Member since 2015 · 118 posts · 46 votes10y
I have obtained a treasure trove of information over the weekend with regards to Mortgages, Rates, Suggestions, Training, etc which I believe I have a better understanding on what to do now.
Since the HELOC is no longer an option for me, I am leaning more towards the HomeStyle Renovation Mortgage Loan. Rates are dirt cheap here in Ohio, and my Contractor stated that he is used to these in CA which should be a breeze for him. I spoke with my Loan Officer at the local bank and he mentioned I could put anywhere from 5-25% down and could get a rate as low as 4.75%. Renos need to be completed in 12 months, the contractor gets a max of 5 draws, however contractors need to be licensed and insured.
These loans are great as the Loan and Reno costs are included in the loan however there is a huge process behind it and can take 45-60 days to close. This type of loan is almost exactly the same as a 203K however it is for Non-owner occupancy rather than owner occupied. Base credit of 720 is needed to be considered.
Here is the kicker, I received a return call from a local loan company who offered me an ultimatum. They stated they will come with me to the table, pay cash for the property for a fast close, and if for say I am willing to spend a max of 74,9 on a property, they will try to get for 70 and if accepted they will make their money by getting it for less. I bring them properties, they flip them, and resell the property to me post renovations with my approval on renos and costs. I purchase at a conventional mortgage rate and turn around and sell the property for the ARV of the home.
It sounds to good to be true, and am a little skeptical about this. Has anyone heard of this before? Would you pull the trigger and do this since there is very little overhead? Thanks, and looking forward to everyone's responses!
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes10y
Originally posted by @Rick Turman:
I have obtained a treasure trove of information over the weekend with regards to Mortgages, Rates, Suggestions, Training, etc which I believe I have a better understanding on what to do now.
Since the HELOC is no longer an option for me, I am leaning more towards the HomeStyle Renovation Mortgage Loan. Rates are dirt cheap here in Ohio, and my Contractor stated that he is used to these in CA which should be a breeze for him. I spoke with my Loan Officer at the local bank and he mentioned I could put anywhere from 5-25% down and could get a rate as low as 4.75%. Renos need to be completed in 12 months, the contractor gets a max of 5 draws, however contractors need to be licensed and insured.
These loans are great as the Loan and Reno costs are included in the loan however there is a huge process behind it and can take 45-60 days to close. This type of loan is almost exactly the same as a 203K however it is for Non-owner occupancy rather than owner occupied. Base credit of 720 is needed to be considered.
Here is the kicker, I received a return call from a local loan company who offered me an ultimatum. They stated they will come with me to the table, pay cash for the property for a fast close, and if for say I am willing to spend a max of 74,9 on a property, they will try to get for 70 and if accepted they will make their money by getting it for less. I bring them properties, they flip them, and resell the property to me post renovations with my approval on renos and costs. I purchase at a conventional mortgage rate and turn around and sell the property for the ARV of the home.
It sounds to good to be true, and am a little skeptical about this. Has anyone heard of this before? Would you pull the trigger and do this since there is very little overhead? Thanks, and looking forward to everyone's responses!
Rick, NICE JOB!! Not so bad, great information you put out here, people need to listen --- these are easy, quill access to easy capital ---
Now, the thing with the closing, thats weird, wold like to hear more about that, that is a strange scenario, how do they take over the right of the accepted offer... please provide more information .... sounds to good to be true :)
- Flipper/Rehabber · findlay, OH · Member since 2015 · 118 posts · 46 votes10y
Originally posted by @Steven Gesis:
Rick, NICE JOB!! Not so bad, great information you put out here, people need to listen --- these are easy, quill access to easy capital ---Now, the thing with the closing, thats weird, wold like to hear more about that, that is a strange scenario, how do they take over the right of the accepted offer... please provide more information .... sounds to good to be true :)
Thanks for your comment Steven! I may have confused you on the story. The loan company was not the one that was offering the HomeStyle. The second loan company I spoke of was offering another option as they did not offer Homestyle. Long story short, they had a "Service" that they use their own contractors, pay cash for the deal to work down the close value to make their cut, flip the house within your budget built on your suggestions, appraise the property, and resell to you at the cost you had envisioned prior to turning around and selling it at ARV or Market value against comps.
It sounds like a fantastic Idea! Like a Birdog/Wholesale/ Joint Venture hybrid Mortgage Machine or something haha. I would be surprised by how many companies are like this out there and how many people have had success using this service. The company is American Loan in Findlay, OH and they are wonderful to work with. Great group and have great reputation around here. Kind of thinking about this for a second mortgage property while I use HomeStyle for the first flip, so I can do 2 side by side.
Cannot wait to hear from everyone on this. Thanks again!
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