Advice on a deal- Please help

[Rigo V.]

Hello All, 

I am fairly new here and to investing overall so please forgive me if I am asking the wrong question or leave out necessary details. I am working on my first deal and wanted some advice.

I am looking at a house in NJ that is listed at 135K. Its a 2 unit house (4br 2 bath and 3br 1 bath) that needs a lot of cosmetic repairs (new flooring, new kitchen, new paint job, land scraping) and this is just from the looks of it. I am meeting with the realtor this weekend to really dig into it.

Numbers look like this - 

Down payment =25K-27K (at current price, will obviously try to get it at a lower price)

Closing costs= 3K-5K

Rehab budget= 30K-50K

Rental Income (once renovated)= $2800 per month 

Estimated mortgage - $1200 per month

Comps in the area range from- 200-250K.

I currently have enough to buy the house but not enough to rehab it, at least not both apts.

1) how can I find a way to finance this deal? Without doing an FHA loan (bought my own house last year and wife will not want to move and rent ours)

2) If I somehow find a way to buy the house and rehab, will I be able to refinance after the initial six month of seasoning to get by some funds back to do it all over again if it appraises high enough?

[Michael Wagner]

Hello and welcome.

Not knowing you it is hard to give great advise but there are options out there for disciplined spenders. Have you looked into a HELOC on your primary residence? Or other sources of credit like 0% interest credit cards. I built my whole house using private money and credit cards but you have to be VERY CAREFUL. 0% only lasts for 12-18 months so your need to have an exit plan and a plan B. Having multiple cards that you can hop around from one to the other every 12-18 months is a workable plan. If you don't already have the lines in place, though it can be tricky as it will ding your credit in the short term. This is an issue if you are trying to use conventional financing to buy the house.

Before you go too far looking for money, you should get a better grasp on the finances. IF this house needs 30K in rehab and is worth $250 in the end, it seems like a deal. If, on the other hand it needs, $50K in rehab and is worth $200K at the end, its not a deal at all. As a new investor you should stay very conservative. If you think it will cost $30K in rehab, budget $40K plus. And use realistic but conservative ARV too. Don't forget to factor in holdings costs as well!

Hope this helps a little!