Need advice on deal and funds for the deal

[Carol Labbe]

I think I found a great deal. I need opinions on a deal and also the funds to buy it. Its a duplex foreclosure - asking price is $79,000. Needs new heating and plumbing due to freezing. Brick exterior. Haven't actually seen the property yet - only pictures, but I figure maybe needs $50,000 worth of work. Estimated ARV is about $200,000. Maybe more because three single family homes next door being built are selling for $250,000. I am thinking of maybe a buy and hold or could be a flip? Rents go for about $1200 in the area. I have about 1/2 of the funds needed. Does this seem like a good deal and what type of loan should I look into?

[Andrew Postell]

@Nghi Le Ah, yes, sorry, I was not clear but let me explain, Just for clarification, that it still might be $0 out of pocket AT THE END of the transaction.  So for others who might be reading this and trying to understand how all this works:

• If you identify a property that is a REALLY good deal.  Meaning your purchase price and renovation costs are BELOW 70% of the "After Repair Value" (like our original forum poster here)
• The Hard Money Lender will fund the purchase price of the home
• The Hard Money Lender will require you to put down the repair costs (or some portion of them)
• That down payment and/or repair costs will be held in escrow to be paid to the contractors
• If you flip the property, then you will pay off the Hard Money Loan, keep the profits.  Contractors were paid from the escrow account.  This method is pretty cut and dry. In theory, any money you came out of pocket you get back when you sell.
• BUT if you were refinancing out, then your conventional lender comes in an refinances the full amount of the escrow account and the purchase price
• For example, Home is worth $100k, Purchase price $50k, renovations $10k. Your downpayment is $10k, HML funds the purchase ($50K). Your down payment of $10k, is actually held in escrow, they add $10k for the renovations also held in escrow. So $50k from the HML, $10k from you for your deposit, $10k for repairs. Your conventional lender comes in and refinances $70k "Payoff" from the HML. Since the HML only needed $60k then your $10k is refunded back to you. Now, I'm not accounting for closing costs here because I just want this concept to be understood. You can absolutely get money back to you in this scenario and I have seen people purchase properties with hardly any out of pocket costs...at the end. So they still give their downpayment/repair deposit but at the end they are sitting pretty good. The same scenario could occur if the renovation costs come in under budget. Admittedly, this is pretty rare but it does occur. Our original poster seems to have this scenario possible with her.

Hope this helps!