Flipper/Rehabber · Member since 2018 · 102 posts · 103 votes
I am looking to purchase a house for 280k that will resell for 380k+ in this market after some updates.
I have 2 options to purchase.
1. Pull heloc out of another property to put 25% down(about 70k).
2. Option 2 is buy with hard money loan and rehab to flip or refi and rent out(it would rent for $2000+).
Which option would you do? Also, if i buy with hard money how soon would i be able to refinance if i want to hold the property and rent it out?
Any advice would be greatly appreciated!
I am looking to purchase a house for 280k that will resell for 380k+ in this market after some updates.
I have 2 options to purchase.
1. Pull heloc out of another property to put 25% down(about 70k).
2. Option 2 is buy with hard money loan and rehab to flip or refi and rent out(it would rent for $2000+).
Which option would you do? Also, if i buy with hard money how soon would i be able to refinance if i want to hold the property and rent it out?
Any advice would be greatly appreciated!
The numbers always tell you what to do.
In this case, the numbers tell you to buy it, fix it and flip it.
$210,000 at 5.5% is 1197. Add taxes and insurance in and you're around $1500. Add the cost of the HELOC and you might break even before management fees and CapEx.
Using the same 210K as a mortgage, updates of around 20K (my guess) and then carrying costs, you're in for $250,000. If you sell it for 380K, you get your 70K down payment back plus about 45-50K in your pocket after closing costs and Realtor fees.
Investor · St Louis, MO · Member since 2017 · 250 posts · 181 votes
7y
It depends on your long term investment goals. Typically lenders will require that you season the property for at least 6 months (Although there are ways to do this sooner). Do you want a re-occuring line of credit, or do you want to pay your HML back and put your money into another deal? These are all things to consider when making your decision.
I am looking to purchase a house for 280k that will resell for 380k+ in this market after some updates.
I have 2 options to purchase.
1. Pull heloc out of another property to put 25% down(about 70k).
2. Option 2 is buy with hard money loan and rehab to flip or refi and rent out(it would rent for $2000+).
Which option would you do? Also, if i buy with hard money how soon would i be able to refinance if i want to hold the property and rent it out?
Any advice would be greatly appreciated!
The numbers always tell you what to do.
In this case, the numbers tell you to buy it, fix it and flip it.
$210,000 at 5.5% is 1197. Add taxes and insurance in and you're around $1500. Add the cost of the HELOC and you might break even before management fees and CapEx.
Using the same 210K as a mortgage, updates of around 20K (my guess) and then carrying costs, you're in for $250,000. If you sell it for 380K, you get your 70K down payment back plus about 45-50K in your pocket after closing costs and Realtor fees.
I am looking to purchase a house for 280k that will resell for 380k+ in this market after some updates.
I have 2 options to purchase.
1. Pull heloc out of another property to put 25% down(about 70k).
2. Option 2 is buy with hard money loan and rehab to flip or refi and rent out(it would rent for $2000+).
Which option would you do? Also, if i buy with hard money how soon would i be able to refinance if i want to hold the property and rent it out?
Any advice would be greatly appreciated!
Definitely get a refi game plan in place before you buy with HML. Even if that is not your plan A it is a useful backup option. Some lenders can refi in less then 6 months especially if you go commercial or long term HML loans for buy and hold. If you want to pull cash out vs a rate and term that may affect seasoning and ltv so make you are aware of how that may change things. Most HML want you to buy with LLC, so you'll need a refi lender willing to work with property where your LLC was on the title.
Lender · Grand Rapids, MI · Member since 2018 · 703 posts · 446 votes
7y
What state are you in? Can usually get out of that hard money in 6 months, but would all depend on the state you are in and the terms with the hard money guy
Developer · Chicago, IL · Member since 2018 · 52 posts · 105 votes
7y
@Brett Lee when you use heloc for down payment who is funding the remainder 75%? If you're qualified to refi out to conventional loan why not just buy the place with the conventional loan to start and avoid the costly points and interest? Doesn't make sense to buy with HML if you're approved for conventional.... do you need the rental Income considered in order to qualify for the conventional loan?
You can buy distressed properties with conventional loans.
Also, there are easy ways to avoid 6 month seasoning issues with conventional refinances.
Flipper/Rehabber · Member since 2018 · 102 posts · 103 votes
7y
Thanks Kath,
My biggest dilemma will be having enough cash to purchase and rehab this house. We have a lot of equity so i am trying to tap into that...just dont want to be over leveraged if economy tanks.
To buy with conventional i need 70k down plus rehab costs of 20-30k. Currently i have 40k available so u would need to pull heloc on our primary and a heloc on rental to have enough to flip.
Trying to figure out if that risk is worth a 50k reward upon flipping OR if i should just walk from this deal?
I am looking to purchase a house for 280k that will resell for 380k+ in this market after some updates.
I have 2 options to purchase.
1. Pull heloc out of another property to put 25% down(about 70k).
2. Option 2 is buy with hard money loan and rehab to flip or refi and rent out(it would rent for $2000+).
Which option would you do? Also, if i buy with hard money how soon would i be able to refinance if i want to hold the property and rent it out?
Any advice would be greatly appreciated!
Definitely get a refi game plan in place before you buy with HML. Even if that is not your plan A it is a useful backup option. Some lenders can refi in less then 6 months especially if you go commercial or long term HML loans for buy and hold. If you want to pull cash out vs a rate and term that may affect seasoning and ltv so make you are aware of how that may change things. Most HML want you to buy with LLC, so you'll need a refi lender willing to work with property where your LLC was on the title.
My plan is to buy rehab and selll... I am looking at refi and renting as worse case scenario if housing market tanks and i cannot resell.
Sounds like if i buy with hard money it is tougher to refi. That is good to know! Thanks!