How do you finance a $22,000 rental in Memphis?

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How do you finance a $22,000 rental in Memphis?

Ben Roberts
Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes

I normally wholesale in Memphis, TN but I've come across a rental that I'd like to own. The property is currently rented for $660/mo, I can buy it for $22,000. It definitely needs some updating and the market rents are closer to $825. The ARV is in the mid $50's. I have a little bit of cash, certainly enough to cover the updates, closing costs, etc. But I don't have enough for the full purchase price. I doubt a traditional mortgage is going to work at this price point. Does anyone have any suggestions, references, recommendations?

Thanks in advance!

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Clifford Paul
Rental Property Investor · Member since 2018 · 483 posts · 956 votes
6y

0% percent credit card for 18 months.  That's how I built my first portfolio until my small bank started giving me a line of credit. 

6Reply
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  • Victor Menasce
    Developer · Ottawa, Ontario · Member since 2014 · 212 posts · 169 votes
    6y

    You're going to be looking for private money for small deals like this. Might be a partnership opportunity at your local REI meeting group. Banks won't touch it for such a small dollar amount. It's not worth the paperwork for them.

    0Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    6y

    Line of credit plus your cash or private money

    4Reply
  • David de Luna
    Rental Property Investor · NorCal · Member since 2018 · 399 posts · 222 votes
    6y

    Skip a JV. Go with Marcus, Lending Club, Paypal, etc. A few of those got my rehab done when I started out. Between a few of them I had 75k in 24 hours. Now that I'm reminded of them, I think I have a use for them again. Think of them as a mini HML. Their lending niche seems perfect for your scenario.

    3Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y

    @David de Luna

    I’ve heard of lending club, but their rates are higher than a cash advance on my credit cards. What is Marcus? Can you borrow money from PayPal?

    0Reply
  • Karen O.
    NYC, NY · Member since 2016 · 617 posts · 456 votes
    6y

    Do you have any $ toward the deal?  If so, might you attempt to get a PL from one of your OOS investors?

    0Reply
  • David de Luna
    Rental Property Investor · NorCal · Member since 2018 · 399 posts · 222 votes
    6y

    @Ben Roberts if your rates are better on your cc than Lending Club and you can get what you need, jump on it. Go where you can find what you need to get your deal done in a way that leaves you enough to wet your beak (borrowed from a line from the Godfather). Google Marcus and Paypal. I can tell you are stepping into this for the first time. Exciting? Frightening? LOL! Sure, take care, be thoughtful, consider risks, but do not fail to try. Do not fail to take risks. It's the only path to rewards. 

    3Reply
  • Craig Jeppesen
    Rental Property Investor · Chubbuck, ID · Member since 2018 · 532 posts · 466 votes
    6y

    Finance a car you own outright or a heloc on your personal residence.

    1Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y

    @Craig Jeppesen

    Already have the HELOC, which is where some of my cash will be coming from. I figure to pay for the property, closing costs, repairs, and to clean up some title issues, I'm about $10k shy of what I'll actually need. I could put up my HELOC and probably run the rest on the credit card, I'd have to re run the number to figure out if that really makes sense to do. If it'll cashflow at the market rent, then it might be worth the credit risk. The other thing I could do is put cash, cover the balance with my credit card, and just flip the property. I'd be all in for about $35k. The property would be worth closer to $60k.

    0Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y

    @David de Luna

    Yeah, thanks. I’ll definitely look at the credit card option. Worst case scenario, I may just put the balance on the credit card long enough to fix it up and then try to sell the property.

    This is my first time trying find a deal without using a more traditional route, like hard money or an FHA mortgage, but I think the upside is there so definitely worth me trying to figure it out. I appreciate the info.

    1Reply
  • Clifford Paul
    Rental Property Investor · Member since 2018 · 483 posts · 956 votes
    6y

    0% percent credit card for 18 months.  That's how I built my first portfolio until my small bank started giving me a line of credit. 

    6Reply
  • Lindel Turner
    Investor · Jonesboro, AR · Member since 2017 · 136 posts · 79 votes
    6y

    @Ben Roberts

    Usually 15 percent down at any bank. I would still go 15/20 year terms. Depending on what you want as a monthly net cash flow. What I do in jonesboro just down the road. Good luck

    0Reply
  • Lindel Turner
    Investor · Jonesboro, AR · Member since 2017 · 136 posts · 79 votes
    6y

    @Ben Roberts

    Leave your home out of it. Just put 4K down. Do repairs out of pocket and roll with it.

    0Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y

    @Lindel Turner

    You’re able to finance property at this price through a traditional bank??

    2Reply
  • Craig Jeppesen
    Rental Property Investor · Chubbuck, ID · Member since 2018 · 532 posts · 466 votes
    6y
    Originally posted by @Ben Roberts:

    @Craig Jeppesen

    Already have the HELOC, which is where some of my cash will be coming from. I figure to pay for the property, closing costs, repairs, and to clean up some title issues, I'm about $10k shy of what I'll actually need. I could put up my HELOC and probably run the rest on the credit card, I'd have to re run the number to figure out if that really makes sense to do. If it'll cashflow at the market rent, then it might be worth the credit risk. The other thing I could do is put cash, cover the balance with my credit card, and just flip the property. I'd be all in for about $35k. The property would be worth closer to $60k.

    How big is your HELOC? I would expect you to have a larger credit limit on it I guess.

    0Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y

    @Craig Jeppesen

    I'm comfortable taking $15k out of the HELOC. There's a bit more but I'm allocating to a couple other projects and can't really touch it.

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    6y

    I have bought a house before with a credit card. The bigger question is whether or not you can afford to own this property if $22k wipes you out. Unless you have some spectacular cash flow and are just broke "for the moment", you might be getting yourself in over your head if you can't write a check for $22k. 

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    2Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y
    @JD Martin:

    That's a REALLY good point.  I may be better off just wholesaling the thing and building my personal capital for the next deal.

    0Reply
  • Jeron Walker
    Investor · Memphis, TN · Member since 2015 · 24 posts · 9 votes
    6y

    @Ben Roberts what zipcode is it in by the way?

    0Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y
    Originally posted by @Jeron Walker:

    @Ben Roberts what zipcode is it in by the way?

    38111 

    0Reply
  • Isaac Hebron
    Investor · Philadelphia, PA · Member since 2017 · 48 posts · 12 votes
    6y
    @Ben Roberts go get a personal loan from SoFi
    1Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    6y

    @Ben Roberts

    Maybe I’ll finance you. How’s your credit?

    1Reply
  • Nathan Williams
    Member since 2019 · 172 posts · 93 votes
    6y

    if you build up enough revolving credit you can float that kind balance indefinitely by cycling it to another 0% balance transfer offer as the current one expires

    0Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y

    @Bud Gaffney

    That would be awesome! I’m send you a PM

    0Reply
  • Mischa Talokonnikoff
    Realtor · Tampa, FL · Member since 2019 · 19 posts · 7 votes
    6y

    @Ben Roberts the flip seems to make sense. Huge return, then just rinse and repeat with another one since you will have capital. Are you really able to get $30kish properties in Memphis that rent? I’m in tampa, our market is a bit different. But wow, wouldn’t mind looking that route.

    0Reply
  • Ben Roberts
    OP
    Rental Property Investor · Memphis, TN · Member since 2015 · 203 posts · 135 votes
    6y

    @Mischa Talokonnikoff

    Thanks for the advice. I think you’re right.

    Sure! I’m looking at a second deal right now. Current rent is $800/mo. Purchase price is $33k.

    If you’d like to do some investing in Memphis, let me know. I’d be happy to help you source property and keep you out of the land mines. Memphis property values can change literally from block to block.

    2Reply
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