Purchase a Wholesale property as House hack with little $?

Question

Hello Friends! Was sent a wholesale property here in a town I have been looking to purchase in. The house has is 2 bed 1 bath, with a detached garage and mother in law. I have been looking for something I can live in and house hack, in a seperate space. This property seems to be just that as I can live in the mother-in-law. The only problem is that it is a wholesale deal at 250k cash, and needs about 40k in estimated repairs to get it rentable. Any thoughts on how I can finance such a transaction? I am 21, making around 60k / year on comission, with 400$ in student loan payments and no other expenses so far. I could manage to scrape together probably 10k from my bank accounts, but nothing near enough to fix up to refinance if I used hard money. Any advice is appreciated, do not want to let another deal pass me by because of lame excuses.

Thanks!!!

Kyle J. · Answer

Most wholesalers are looking for cash buyers because they promise a "quick close". So it's not likely that getting a mortgage will work for this deal. Even if the seller/wholesaler were both okay with waiting for you to get a mortgage, it doesn't sound like you have enough money to cover the down payment, repairs, and the wholesale fee (which the bank isn't going to finance). Hard money is probably out too since you intend to live in the property and most hard money lenders won't loan on owner-occupied properties. If you don't know anyone (friend, family member, etc) that can loan you the money (private loan), then you could try to partner with someone who does have the money. But even that is going to be difficult since you intend to live in the property. How would the partner get their money back? They can't sell it after it's fixed up if you're still living in it.

In your situation, you probably need to look at going the more traditional route and purchasing a non-wholesale property (2-4 units) with a FHA loan, or FHA 203k loan if it needs work, given the relatively low amount of money you have available for the down payment and repairs.

In your situation, you probably need to look at going the more traditional route and purchasing a non-wholesale property (2-4 units) with a FHA loan, or FHA 203k loan if it needs work, given the relatively low amount of money you have available for the down payment and repairs.

Blake King · Answer

Thanks for the replies everyone. I am currently paid 30k base / year, and making 30k+ / year comission, so I can qualify for so little since I do not have 2 years on comission like lenders require. And yes this property is a distressed seller that needs out now, so it must be cash and quick close...

Kevin Romines · Answer

Depending on the time you have available to you to close on the transaction, you can use an FHA203K loan. It requires 3.5% down so that would eat up $8750.00 of the 10K you have available and you would need to get the seller to agree to pay your closing costs, which shouldn't be that hard? The big question is, will the seller wait the amount of time it takes to close on this kind of deal? 45-60 days realistically.

Other then that, get a partner to go in with you on it using a hard money loan. They need to bring some dollars to the table along with yours. You can pay that partner off when you refinance the deal after the rehab. If you look around, you should be able to find a hard money lender that will do the deal with between 10-20% down and they will cover the rehab costs. So more money then you have, which is why you need a money partner on the deal. But the money partner can get their money and profit back out of the deal within 6 months at the point of refinance.

Timothy Tooker · Answer

@Blake King

Have you tried to get approved for a mortgage? That would be the first step.

Blake King · Answer

Thank you @Sean Baker. Just happens to be bad timing as my father just purchased a wholesale deal last week and tied in all his cash. Seller is in trouble with the bank and needs out so the seller finance option is out. Still looking into who I might be able to get financing from. Washington tax laws are changing too for how much you can claim from rents, which could change things as well...

Sean Baker · Answer

If you are able to either get a seller carry, family loan, find another investor or a combination of the three you could get this loan as a mixed use investment property with No income Verification loan at a decent rate. The problem is that the LTV would have to be 75% or possible 70% due to first time investor. If you believe in this property there is a way.

Purchase a Wholesale property as House hack with little $?

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