Analysis Paralysis to Getting my Feet wet

[Nickea Bennett]

Hi everyone,

Getting started is really overwhelming. I am trying to move out of the analysis paralysis phase and want to get my feet wet and take that leap. I am currently looking at two possibilities one a foreclosed SF home and the other a duplex with renters occupying the residence. I want to flip both but may end up keeping the duplex if I am able to get a lender to work with. The landlord we used to rent from (currently own) has a property that he is willing to sell with current renters, this one cost a bit more than the other two. 

I tried to contact a few of the HML and private lenders here on BP recommended list and one, in particular, is willing to work with me but I have a few questions that I hope I can get answered.

1. The HML wants me to pay them $250 for pre-approval letter as a way to hold on to our business. I would get the money back as a credit. Plus, the credit score must be at least 600. Does this sound right?

2. A first-time investor with limit resources to fund the remaining balance of the loan. HML require 10% down and %10 down for rehab with 12% interest.

What options available for a new investor to acquire the additional funding? Properties are located in PA and I was told the seller can only assist with up to two percent. 

3. I was told that I must have an LLC and if I am going to use a borrow/partner they must be a member of the organization. Also, if my credit score is lower than the other member/partner that other member must be president. Does this sound right?

I have been researching real estate investing for a while, on and off, and was able to purchase our first home in Dec. 2017 and want to actually jump into the investing aspect of things.

Best regards,

Nick

[Amanda G.]

It sounds like you are jumping in the deep end on your first purchase. You're asking a lot of detailed questions about HML, so you are probably going to hate that I'm changing the topic slightly. Does the rest of the deal analysis work for you? A foreclosed home is likely to need a lot of additional rehab. Stepping into a purchase with current tenants can be a lot easier, if the numbers are good.

You might look at a HELOC on your personal home, but not until you have really worked through the risks. it would be awful to lose your own home on your first investment purchase.

It has only been five months since your home purchase- how is your emergency fund? Could you cover your deductible, plus more, if something bad happened? 

#3 is pure nonsense. that leads me to worry about the rest of what you are hearing from the HML.