Professional · Upper Darby, PA · Member since 2016 · 11 posts · 13 votes
I have my first deal under contract. SFH purchased for $25K in Clifton Heights, PA. I am estimating the Rehab cost at just over $50K. We are using our own funds for the purchase price and closing cost and have funds for the Rehab but would like to borrow those funds instead of strapping us. The home will be a Hold and should rent for approx $1,200 a month. Our goal is to rehab, fix and then Refi and pull our borrowed money and the majority of our initial investment back out. ARV I am estimating conservatively at $110K so we should be able to Refi at $70-75K.
If you are wanting to do a Hard Money Lender purchase and then Cash-out refinance (commonly referred to as the BRRRR strategy), then, I would recommend you use as little of your own money as possible. Hard Money Lenders should be able to finance the purchase and Rehab together.
Check the BP menu. Go to the Market place. Then click on Hard Money Lender. Find your state and it will give you a list of Lenders in your area.
Contract the lenders and see what their terms are. Shop around to find a deal you like.
Also if haven't already find the bank lender you are going to use for the Cash-out refinance. Get pre-qualified (or even pre-approved) to find out what type of loan you can get (amount, terms, APR). It will help your analysis of Cash Flow for after the refinancing.
If you are wanting to do a Hard Money Lender purchase and then Cash-out refinance (commonly referred to as the BRRRR strategy), then, I would recommend you use as little of your own money as possible. Hard Money Lenders should be able to finance the purchase and Rehab together.
Check the BP menu. Go to the Market place. Then click on Hard Money Lender. Find your state and it will give you a list of Lenders in your area.
Contract the lenders and see what their terms are. Shop around to find a deal you like.
Also if haven't already find the bank lender you are going to use for the Cash-out refinance. Get pre-qualified (or even pre-approved) to find out what type of loan you can get (amount, terms, APR). It will help your analysis of Cash Flow for after the refinancing.
Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
9y
If you want to use hard money, you will need to find someone local to you. That small of a deal is unlikely to interest any national lender. If prices in your area are normally that low, it may be that a local lender will be expecting those small numbers and will be interested.
You have a few other factors that will limit the number of lenders who will be interested:
First deal (no experience)
Rehab more than the purchase price, meaning fairly major rehab
Exit strategy is to refi, and even that loan amount of 75 won't be enough to interest some conventional long term lenders, making your exit strategy out of the hard money a shaky one
So I disagree with @John Leavelle that you will have an easy time finding 100% financing. But agree that you should look for the end financing now. Without knowing if you have conventional financing, you have no exit strategy out of the hard money.
Go to local real estate investor groups and ask around for local lenders. Call all of them. Good luck
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
9y
As a HML I typically don't lend less than 50K for any deal. Even at that you have to get a lot of loans out to make an decent money. I personally shy away from less expensive properties. I would especially shy away on a lower end buy and hold. Those typically are harder to manage and usually have higher turnover than more expensive units.
Professional · Upper Darby, PA · Member since 2016 · 11 posts · 13 votes
9y
@John Leavelle - I have taken those steps - most of the National lenders showed little interest - next steps will be to look towards longer term lenders and how quickly I can flip this into a conventional loan.
@Ann Bellamy - thanks for the advice - I am finding it more difficult than expected. I was thinking if I used my own money it would show I had "skin" in the game but most of the national groups have already said they are not interested. I am getting some interest from local lenders but one would only lend to an Entity, and the other wouldn't lend to first timers, which is ironic since I have a lifetime of remodeling, but none as an investment property. I manage as my Profession over $45MM in Redevelopment of apartment homes a year to boot... Keep on grinding though - I will get it.
@John Thedford- Thanks for the insight - what would put a HML more at ease given the difficulties? I have no worries that this will pencil when completed - my numbers are pretty conservative given the rental market in the area and the timing of when I expect to have it ready to rent. May/June is when the rental pick up in this area and have seen rentals $150-200 higher than my current projections from last year.
Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
9y
@William Strehse, most hard money lenders will lend only to an entity. That is the challenge with inexpensive properties: If you form an LLC and buy in the entity, you now can't get conventional residential refinancing, you have to go commercial, and most commercial lenders won't do a loan that small either.
And your own skin in the game is a given in my book, as is the LLC. Which doesn't matter, as I don't lend in your area. But as you are finding, small inexpensive SFRs for buy and hold sound good on to a beginner, but have unexpected challenges.
Again, go local. Perhaps you will meet someone at the REIA who is interested in investing but doesn't have the time to find and manage a deal.
I have not used a Hard Money Lender yet. I agree with @Ann Bellamy that you will not "have an easy time finding 100% financing ". That was not what I was trying to say. I also agree your best bet is to connect with a local REIA and find Private Money Lenders. That is how I financed 3 BRRRR deals.
Wholesaler · Chesterfield, MO · Member since 2015 · 41 posts · 37 votes
9y
Hi William,
I'm a HML in St. Louis only. If you want to find a private lender or a HML in your area just go to every title company in your town and ask the who are the Private Lenders and Hard Money Lenders that they do business with. You will find all the money you need. Ask the lender what their terms are.
I specialize in the $50,000.00 and under loans. I lend strictly on the value of the house. No Application or Credit Checks. I LOVE doing equity loans! They are a lot safer than purchase loans.
I will only lend to an LLC also. The reason is when a borrower doesn't pay and they own the house in their personal name they file for bankruptcy claiming that fixer upper as their personal residence. (very dishonest) But it happens. So 9 times out of 10 they wont file for bankruptcy trying to claim that fixer upper as their personal residency.
Keep in mind with a HML the money is expensive so you don't want to use that money for long term hold financing. Be sure you can refi out at a lower rate and a longer term loan.
Professional · Upper Darby, PA · Member since 2016 · 11 posts · 13 votes
9y
@Shawn Greeves - thanks for that advice! I will reach out to the title companies as I have already established a relationship with a few, and it sounds like I need to get the LLC in the works. Thanks everyone for the tips.