Deal analysis this investment property

[Jeroh Odafe]

Can I please pick your brains a little? Here it goes. I currently have a 4 Plex under contract for $750,000 in a nice part of Phoenix. The arv will be around $1,050,000 on the extremely low end.

To finance the deal, I'm thinking of using hard money and heloc from 1 of my properties. Hard money loans are crazy at this point and the numbers don't check out with a hard money loan. Which is making me second guess it all. With hard money loans I'm getting 10% interest rates (wish I could find something in the 7% range, with 10% down payment). If you can get me something in my range, please shoot me a DM.

My exit strategy is to refinance ASAP when all the work is done to a 30 year fixed as the property is off market.

It can rent for up to $6500 to $7000 per month for all 4 units when fixed up.

Is this a solid deal?

[AJ Wong]

Hi Jeroh, how extensive are the repairs needed? You can certainly borrow against your investment properties utilizing creative income guidelines, including bank statement or DSCR. If the property is financeable then a DSCR loan for the 4plex with a downpayment from the other properties could be a strategy to consider. Some DSCR lenders will allow the proposed income to qualify, but needs to be able to pass an appraisal. For private money 10% would be a 'good' rate. Check in with @Joseph Chiofalo for a full range of loan and mortgage options including fix and flip and the investment property Heloc and seconds. Good luck! 

[Joseph Chiofalo]

Hi Jeroh, 

When do you need to close by? 

How much were you looking to borrow on the heloc?

[River Sava]

Are you looking to do light cosmetics or extensive rehab? If it is light, a dscr purchase would be a great option as it is typically 30 year fixed and around 7% give or take depending on cash flow, credit, and leverage. 

However, you could do a quick bridge loan at a high interest rate and then do a dscr rate term refi to get out of the high interest. Sending you a dm to connect!

[Mike Klarman]

Loan 1:

Purchase for 750k on a bridge loan with rehab.  You'll need to put up 150k plus closing costs here to close on this deal.  Loan amount will be 600k + 100k rehab?= 700k? 

But let's say you do and in 60 days the work is done and the ARV is 1.1 and you rent them out for 8k (best case scenario). You'll get a 75% - 70% cashout depending on the DSCR. So let's see at 75%. Your loan amount would be 825k. Pay off the 700k bridge loan and you collect 125k of your 150k back so you'd leave 25k in. Your par rate for a 30 year DSCR for a 4 unit that with a good credit score will be high 7s most and your payment will be 6500. You collect 8k, so csh flow 1500/month with 25% equity of 1.1 million on paper with 25k real dollars invested.

I'd do it if the 25k meant absolutely nothing and wasn't stopping me from pursuing any deals.

[Cam Schwartz]

Hey @Jeroh Odafe, we have a proprietary BRRRR calculator and I've assessed the contemplated transaction with our tool. See below output with a few thoughts:

- Would need a few more data points to be precise (rehab estimate, duration estimate, property taxes, insurance, utilities, HOA, maintenance, etc.).

- Assuming a 12% HML with a 3% origination fee held for 4 months, with a 30-year cash out refinance at 70% LTV and 7% interest rate, where the property stabilizes two months after refinancing (6 months after purchasing), you would (i) nearly breakeven on the cash out refinance and would generate $455 in monthly net cash flow in year 1, increasing annually, assuming you rent for $7,000 in year 1 and increase rent 4% YoY.

- See below and let me know if you would like me to send you a copy.

[Kyle Joseph]

@Jeroh Odafe It really depends how much you need to spend in capex to get the property the the $1,050,000. If you can share that number, at a minimum, you'll get more informed responses. If you want some help ballparking those costs, let me know and I'm happy to help.