What would you do?

[Connor Eigen]

Hi everyone, 

Im under contract for a STR and just got the loan estimate back. It was not what I was expecting. I was expecting to put 20% down and have an interest rate of about ~8%. Due to the appraisal of the house and the DCR being negative, my loan estimate is now 25% down and an interest rate of 10.5%!! My initial investment will be around 30k more than I calculated for.

I am using some cash and a HELOC to finance the purchase of this property. My worry is if the house doesn't perform like its supposed to. What would you guys do?

I estimate the house would gross ~60k. Heres the numbers on the house.

purchase price - 380k
loan amount - 285k

Interest rate - 10.5%
estimated expenses - 3.6k

Estimated monthly gross - 5k 

[Leslie Anne Morris]

I’ll go against popular belief here and tell you my recent deal. Dec 2022. Paid top of market price, ended up with 10% rate at closing table - couldn’t back out. No contingency would allow that. Would have been in breech of contract. Closed. Forced appreciation - this is key - had my remodel / rehab team kill it in design and value add.

But then literally two months later a drunk driver hit my cabin. Tragic. No cash flow for 2 months. Insurance kicked in thank goodness - interviewing my agent on YouTube tomorrow.
So then we are back up and running and it’s literally all rainbows. Just filmed an episode of a massively popular TV show there. I signed an NDA so can’t disclose what it is yet but it will be airing soon. 

July did awesome but it’s my first super good month unfortunately and I had stayed there a week with my family.

Anyways, that’s my story. The key for you to takeaway would be the forced appreciation / value add. Focus on what you can do and not what you can’t. Fear will have you back out. Do keep in mind though that you’re going to need cash and cash reserves to weather that storm. So for that reason it may not be for you. Only you can decide.