Hard Money Lender -- Rhode Island

[Domenic Marchetti]

I have a small (700 sq ft) 2 bedroom SFH short sale with a negotiator in place. Selling price is $55,000 with a ARV of $80 to $90,000 with $5,000 in rehab costs (max). Income potential is $12,000 annually.

I'm looking for a lender willing to do 100% financing since there is at least $25,000 of built in equity on the property.

Any suggestions would be appreciated.

[Anthony Thompson]

Domenic, I'm chiming in only because I think otherwise, your post might go with no responses.

From a lender's point of view, what I'd hear would be "I barely have $5000 to do the rehab, I don't have anything more than that, so I need 100% of the purchase price", which as a lender is a challenge.

Assuming the other #s bear out, a lender would much rather see you ask for 40K, come to closing with 15K, spend another 5K on renovations, and then maybe they would be willing to reimburse you for the 5K renovations (thereby adding 5K to the loan balance).

That way they can see you have $ at risk in the deal just like them, and also that you have the financial discipline to save 20K for a project like this (and are so confident in your #s that you're willing to risk the 20K).

Also as a lender I would probably scrutinize / be cautious on the comps supporting the 80-90K ARV just because a small 700sf 2BR house can be a lot harder to sell.

I don't know that the #s would make sense for a buy, fix-up, and resell deal, they're pretty tight when you factor in closing/holding/selling costs. Personally I'd want to be acquiring that property for 35-40K if the plan was to fix up and resell at retail.

On the other hand if the property is close to you and you personally want to buy and hold it (fix up and rent out), then it may be OK. But ask yourself if you'd mind going over there a lot especially in the first year (i.e., is it close enough or too far where it would get aggravating), and also ask yourself what kind of tenants you'd get for the house/neighborhood.

If you do want to buy, fix, and hold, you may want to look for "private money" instead, which is usually from family & friends and at a lower rate that makes more sense for long term holds (e.g., 8 or 9% instead of 13-18% for hard money).

Even with private money though, any lender is going to be skeptical if the scenario is "I barely have 5K to scrape together for the rehab, basically I need you to buy this house for me and then I'll try to make my 5K work".