IM BACK! - Thinking Buy & Hold - Dundalk!

[Shawn McCarty]

Hello Everyone,

Took some time away from focusing on becoming a real estate investor to get some things straightened out in my person life... I am BACK! smarter and more determined than ever!

So I am thinking about picking up a buy and hold in the Dundalk area. Any general thoughts right off the bat?

So my main question is this... If I do hard money to get a buy & hold (including the rehab costs).... What do I do next? Obviously I need to Refi right? Any it has to be conventional right?

Thank you,

Shawn

[Rob Poole]

Hey Shawn,

I own a single family rental property in Dundalk -- I like the area for this purpose. I used a private lender to fund the acquisition cost, rehab, and holding costs. I then refi'ed with a conventional loan 6 months later (minimum 6 months seasoning period for a conventional 75% LTV loan). I was able to pay the PL back in full including interest PLUS get some cash out. (Bought property all in for ~$70k, put ~$30k in for rehab, ~$6k in carrying costs due to having to hold the private loan longer, ~$3k in closing costs, property appraised for $150k, total loan on refi is $112,500.)

I like the county side -- it's a nice working class area with what appears to be good renters. It's also affordable with good potential for cashflow.

Using hard money for a buy & hold could be tricky due to the high cost. You could go this route if you find a really good deal, but have a good portfolio lender on hand (that doesn't require a minimum seasoning period to base the loan amount on the current market value/appraised price as opposed to the most recent purchase price) ready to start the refi when you finish rehab (it wouldn't be very feasible to wait out the minimum 6 month - 1 year seasoning period (most conventional conforming loans require a minimum of 1 year seasoning for a conventional loan) while carrying the hard money loan). You should also make sure the house will, conservatively and realistically, appraise for a higher value than what you purchased it for.

For example: you purchase a property for $65k including all closing costs, rehab it for $30k, carry it for ~$5k (monthly utilities, fees, interest); this adds up to $100k all in. If you want to make sure you pay everything back with nothing out of pocket the property will have to appraise for at least $150k (giving you a max loan of $105k at 70% LTV -- the most lenders will lend on an investment property (some will do 75% LTV)). Keep in mind you will also have to pay closing costs on the refi, which this scenario will allow you to do (or at least come close to it depending on your actual closing costs).

Also, keep in mind this also affects your cashflow. Financing a deal 100% cuts down on your monthly cashflow -- again you've got to make sure you're getting a really good deal. You can still cashflow, it's just harder to find that good of a deal, but possible!

Good luck and happy hunting, Shawn!

Rob