Lending Strategy in TX

[Daryl Frazier]

Hello All, Daryl Frazier from Central Texas here. I would love to have feedback, opinions, different strategies, etc. on a deal I'm currently working: SFR purchase price is $85,000 ARV is coming back @ $115,000 and rehab costs are $6500 (minor repairs) 1. This seems a good deal but I would love feedback from the community. 2. What type of financing should I look for to fund this deal? Thanks everyone for your support. Daryl

[David Ivy]

Hello Daryl! 

I can't speak to your ARV or rehab estimate without knowing the particulars of the property. However, in analyzing the deal, you should always factor in "quiet costs." When you buy, you should factor in title insurance (if the seller doesn't cover it), survey (if necessary), inspection costs, appraisal (if your lender requires it), and other misc. closing fees. There are also holding costs, such as property taxes, insurance, utilities, and maintenance (e.g., yard service). When you sell, you will pay title insurance (most likely), real estate commission (3% of the final sale price to your agent & another 3% to the buyer's agent), buyer requested repairs, and other misc. closing fees.

You would probably be looking at a hard money loan. Some hard money lenders will lend 100% of acquisition and rehab costs on a deal in this price range. With hard money loans, you're looking at 12-14% interest and 3-6 origination points, with interest-only payments for the term of the loan. With a $6,500 rehab, it appears you're looking at a very quick turnaround. So, be sure your lender will do loans shorter than 6 mo. and/or will not penalize you for paying off the loan early. If you finance the deal, be sure to factor that into your costs.

I hope this helps! I'm in Austin, but I have a fourplex rental in Killeen a few minutes from Ft. Hood.