Indianapolis Cash Purchase Looking for Lender on $50k Renovation

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Indianapolis Cash Purchase Looking for Lender on $50k Renovation

Deuce Thevenow
Member since 2020 · 17 posts · 5 votes

Hey Everyone,

I have my first property under contract for a 2/1 in Indianapolis that I was able to get before it went on the MLS. I am planning to purchase for cash but I have the option to purchase using a hard money loan but the loan costs are really high. I'm trying to find a lender that would lend ~$50k for the renovations.

Any help would be much appreciated.

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
5y

Congrats on your purchase.

If you bought it at a good price, hard money lenders will often lend you most or all of the rehab plus purchase.  Keep your cash for emergencies.

What do you consider "high"? When I used HML frequently, I was paying 12-14% interest plus 2 points at closing. I understand you can get HML for 8% or lower now. Since you should only be in a HML for one month, two max, the total cost usually isn't that much and the benefit of keeping your cash in hand far outweighs that.

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    5y

    Congrats on your purchase.

    If you bought it at a good price, hard money lenders will often lend you most or all of the rehab plus purchase.  Keep your cash for emergencies.

    What do you consider "high"? When I used HML frequently, I was paying 12-14% interest plus 2 points at closing. I understand you can get HML for 8% or lower now. Since you should only be in a HML for one month, two max, the total cost usually isn't that much and the benefit of keeping your cash in hand far outweighs that.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Greg Scott:

    Congrats on your purchase.

    If you bought it at a good price, hard money lenders will often lend you most or all of the rehab plus purchase.  Keep your cash for emergencies.

    What do you consider "high"? When I used HML frequently, I was paying 12-14% interest plus 2 points at closing. I understand you can get HML for 8% or lower now. Since you should only be in a HML for one month, two max, the total cost usually isn't that much and the benefit of keeping your cash in hand far outweighs that.

    I have seen 8% advertised but never have seen anyone actually get it.. also important to note that the big HML in the country price by experience first and foremost.. to get the best rates one needs to have done many many transactions in the last 24 months as high as 20..

    For someone who is first time or only has a few under their belt getting the best rates is not going to happen   at least from a company in the business of lending on fix and flips

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  • Account Closed
    Rental Property Investor · Indianapolis, IN · Member since 2019 · 8 posts · 3 votes
    5y

    @Deuce Thevenow

    I am currently looking for my first flip and getting approved with MM Lending and CPL fix and flip loans.

    Thought about a partner? I can offer contractors and construction management experience and possibly rehab costs. Let me know if you are interested.

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  • Deuce Thevenow
    OP
    Member since 2020 · 17 posts · 5 votes
    5y

    @Greg Scott I have seen the lowest at 12% and 2pts with $1200 in admin fees but don't think they will fund the 50k rehab it is too small. The highest has been 15% and 5pts and will fund 100% at closing but this is a pretty pricey option.

    The other idea and I'm not even sure if it is possible was once I have the title was to try and do a HELOC against the value of the house. I'm purchasing for 67k so would be about 75% of the value of the house and a rate of 3%. I spoke to Indiana Credit Union about doing this as rapid refi but isn't a for sure bet as they normally do for owner occupied not non-owner.




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  • Deuce Thevenow
    OP
    Member since 2020 · 17 posts · 5 votes
    5y

    @Jarrod Jemison I have a call with a GC today to explore a partnership as an option. My family is going to handle the kitchen/bath and hardwood refinished but open to exploring options. I'll dm you

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  • Deuce Thevenow
    OP
    Member since 2020 · 17 posts · 5 votes
    5y

    @Jay Hinrichs yeah thats why I'm probably going to purchase it cash, the loan costs are really high and eating margins. I need to get this one under my belt to use the lender that I want just don't have any experience yet.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Deuce Thevenow:

    @Jay Hinrichs yeah thats why I'm probably going to purchase it cash, the loan costs are really high and eating margins. I need to get this one under my belt to use the lender that I want just don't have any experience yet.

    OK then this is for sure a friends and family deal.. If you have the refi in the bag then even using CC would work.. but make sure the refi is 100% you dont want to get stuck with worse rates than a HML would charge you.

    and yes 50k loans are very tough.. there just is no money in them.. when borrowers think owner occ rates and 1 point etc.. Keep in mind any lender that is in business for profit.. will need to make at least 3 to 4k on a file.. thats in points and junk fees if they are doing it for less than 3k thats a great deal you found.. U simply cant run a lending company without bringing in the aforementioned 3 to 4k per file you would go broke. with your HML keep in mind the interest rate or 80 to 90% of it is a pass through they have to pay that to the actual funding source. these are not companies like banks that can pay depositors 1% then lend it out at 5.. Or get funds at the federal funds rate.

    they get their money from investors  just like we all do..  so those shops all run on points and fee's and a little on the interest delta.. Now the bigger ones that might have 100 to 500 million out their interest rate spread can be real money but the smaller shops its all about the points and fees.. HOpe this helps putting it into context on a 50k loan.

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  • Deuce Thevenow
    OP
    Member since 2020 · 17 posts · 5 votes
    5y

    @Jay Hinrichs yeah, I understand kind of a tough amount to get a loan for that justifies the loan costs. Thanks for the help!

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  • Lindel Smith
    Insurance Agent · Indianapolis, IN · Member since 2016 · 38 posts · 16 votes
    5y

    Hey @Deuce Thevenow. Congrats on your first investment! Have you thought about how you would pay back the lender or protect your own investment/equity if an accident occurred like a total loss fire, frozen pipe burst, or some vandals found out the property was vacant and under renovations? 

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  • Deuce Thevenow
    OP
    Member since 2020 · 17 posts · 5 votes
    5y

    @Lindel Smith assuming you are referring to getting insurance? Sure shoot me a DM

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