hard money is this right?

Question

i have a subject property...for sake lets say an accepted offer of $150K...needs $50K of work...after repairs estimate of $275-$300K

what is the required down payment?....i know the rates are around 15% with 4 pts...

Scott Miller · Answer

Being from MA and familar with the Boston rental market, 2400.00 for rents aren't out of line (depending on location and property type).

There are 75 & 80 ARV programs available in MA, but I'd need to no more about you and the investment to determine qualification.

Rates are as low as 7.02% + 3.5% in points (for the 80 ARV program) and as high as 13.88% + 4 points for the 75 ARV program.

Aside from getting a handle of the actual ARV, you need to quantify your buy/hold/selling costs so that you can properly calculate the best possible offer.

Regards,

Scott Miller

Jon Holdman · Answer

No, not really.  Not really rocket science.  You need to be sure about your comps and rehab costs.  The lender will likely want an appraisal.

Be sure about your exit strategy.  Houses in this price range are better for flips.  Assuming expenses of 50% of the rent, I calculate you're going to need $2400/month in rent to be break even if you refi $192,000.  That's leaving your cash in the property and returning nothing on it.  Seems too pricey to be a good rental to me.

Jon

Jon Holdman · Answer

When you say the ARV is $275-300K, I hear $275K.  Hard money is normally 70% of ARV for the max LTV (loan to value).  That gives you $192.5K for the max loan amount.  The closing costs and points will be deducted from the loan.  That's the 4 points plus closing costs., so about $10K.  That leaves you $182.5K as the loan proceeds.  You use $150K to pay for the property.  That leaves you $32.5K.  That would typically be held in escrow, and only be given to you when the repairs are completed.  For a big job, like $50K, it might be disbursed in increments.  Depends on the lender, but I doubt they would just let you have $32.5K at closing.

There is no down payment.  But, you are going to need the money to cover the additional rehab costs, as well as holding costs.  Some lenders will want to see you have enough reserves to cover the payment for the loan term. Figure the additional on the rehab, $17.5K, plus holding costs.  Maybe 5-10K for that.

Jon

Robert Granara · Answer

wheatie -thanks...

i could come up w/ the $17K plus the costs...so after the work is complete i  then obviously refinance...and i assume i need to set all of this up prior to the deal, so that i cover all the bases...am i missing anything else?