How to finance - reo says 'cash'!?

Question

I am not a real estate investor.  Let's just start there, lest you think I have any idea of what I'm doing!!  ;-)))  (chuckle)

I have my eye on a house - REO asking $200k; says 'cash only'; will not qualify for conventional as it is "as is" in need of work - (4 bdrm/2.5 bath on 10 ac; + 900 sq. ft guest house).  This would become my primary - with renting the guest house. There were 2 other offers that fell through - if there was an appraisal - could I get my hands on it? house has been listed >200 days - is this to my advantage?  seems so.

Now I don't have $200k just laying around (tee hee!) .  . .  how do I buy this property with the least amount of cash out-of-pocket?

Now - I own a house outright worth @$135k. is becoming a rental.

I have another house (primary residence) - probably irrelevant except for current debt ($800/mo escrow) - not much equity.

I have a fair amount of savings ($100k+ liquid) - have extra $$ in various retirement accounts.

What is the best way to pull this off?  Should I (could I?) take a mortgage on the house I own outright - then make up the difference with savings?

I'm assuming I could not use a 'construction loan' because the terms are 'cash';  is a loan possible?

really don't have much knowledge about how to do this (obvious huh!) - but I am sooo in love with this property!  and I have much research to do yet on the house  . . but . .  if I can't come up w/ financing - there's nothing to research!

Really appreciate any help you can provide

Thanks so much

kelly

Wayne Brooks · Answer

The FHA 203k program is designed for this.  Essentially, you can borrow purchase price and repair costs, with a certain down payment.  The repair work must be done by a licensed contractor.  The seller Might consider an offer like this at this point.  Talk to listing agent.
You didn't say what/how much the needs in repairs.
If you can mtg other property, combined with cash, that is an option if it's enough to also do the repairs.

Wayne Brooks · Answer

Sorry, "as it is NOT finanable as is".

Sharon Vornholt · Answer

Kelly -

I have to wonder if this is really a good deal if it has been sitting there for 200 days. You might want to spring for an appraisal and a home inspection on this one.

Sharon

Kelly G. · Answer

Thanks Wayne - guess I mis-understood a 'hard money loan' - thought it would be more like cash . . .

have a much better idea of what I need to do . . . I think . .

have to mull it over . . .

really appreciate your comments and time - to all!

Kelly

I'll be monitoring if anyone else has thoughts!  please chime in . . .

Wayne Brooks · Answer

Yes, a cash offer is always stronger.  BUT using hard money is NOT the same as cash.  POF for cash would be just that.  Make absolutely, positively sure a hard money lender (HML) won't back out before you sign a contract with no financing contingency.  HML rates vary from 10% with 2 points to 18% and 5.  With 50% of you own cash in though, you might get the better rate and terms.  Some will require Minimum 6 or 12 mo.s interest, even if you pay it back early.  Make sure when you can refinance in 6 mo.s, whether it's at a percentage(65-80%) of Value, or of Your Purchase Price.

Kelly G. · Answer

anybody still monitoring?

First - let's assume that after a walk-through w/ contractor and maybe appraisal - all looks good (reasonable repairs - good appraisal) . . .

So . . . is it true that I would be more likely to get my offer accepted on a 'cash' offer vs a loan - even if it were an owner-occupied fha 203 loan?

If so - and I'm thinking this would be true - let's say I take a mortgage out on my house = $100k; and get a hard-money loan for say - $100k - what is this likely to cost me over - say 8 months?

I'm thinking I get the house fixed and take out a conventional to pay us back!  I'm also thinking - since the house is large, on 10 ac - with a guest house - an appraisal = $400k does not seem unreasonable. - but let's say $350k to be safe.

Like I said - I've never been good at the financing side - have a good eye and can fix almost anything to high end on a quarter! (not a dime!  - chuckle)

Thanks for your help!

Kelly

Kelly G. · Answer

wow!  hey - thanks everyone for your comments!

I DO need to get a contractor out there ASAP - and talk to the listing agent.  I did a very quick walk through (now wish I had spent more time);  the last owners (who lost the house) took 'everything'! - sinks, stove, dishwasher, furnace!, water heater! Structurally - the house seems fine - built in '98.  Cabinets, floors, walls, windows all in good shape.  I don't know why at least 2 previous offers fell through - yes - have much research to do!! although I'm told that because this is in a small town, the other offers were likely from folks looking for a second house and didn't want the repairs.  I did notice the windows in the guest house have broken seals (dual pane w/ moisture inside) - did not notice this on the main house.  It is on a well and septic - need info there too!

I am willing to put in a little $$ to find out what's really up.  Posted these finance questions as this is generally my weakest area of knowledge.  And, as I said, I don't really have $200k laying around, but could probably muster it if I had to - though probably not very smart!

Again - really appreciate your input!

Kelly

Thomas Fortune · Answer

Hey Page -

Would you mind posting a link or other info regarding the Wells Fargo rehab loan? I know there are many rehab loan options that will cover cosmetic repairs, but i'm wondering if this program you mentioned will cover other structural repairs that typically make a property "cash only" (like the OP mentioned).

Thanks!

Wayne Brooks · Answer

They advertised it as cash since it is financable AS IS, and would have rather had a cash offer.  But, after this amount of time they may be willing to look at a 203K type offer, IF you  get pre approved.  Ask the listing agent.  How bad of a condition is it in?

Page Huyette · Answer

Wells Fargo also offers a rehab loan that will loan 75% of ARV if you can do the repairs and purchase the property for that amount, with 25% down. This is similar to a 203K but without PMI if you can come up with the down.

I would get a licensed contractor to take a good look at it before you even make an offer and look into financing, as it sounds like there could be more work than you might want to take on.

How to finance - reo says 'cash'!?

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