Hard Money or Conventional for First Rental

[Zack Clopper]

Hi Everyone,

Buying my first investment property, the house i am putting an offer in on is $80,000 bank owned. The house needs the following:

-Vinyl plank flooring throughout home which i would install myself (850 sqft home)

(850sqft x 2.69per sqft = $2,286.50)

-New windows (11) 

($160x11= $1,760)

-Painted and spots patched where previous owner had screw holes 

(Est. $600)

From the estimates i have got seems like it will cost under $7,500 for repairs, i added a little buffer. 

The hard money lender i spoke with pre-approved me but since my first investment property the terms will be the below.

- Purchase Price = $80,000

- Loan Value = $72,000

- Hold back amount = $9,000 (1 or 2 Draws)

- Interest Rate = 12%

- Monthly Payment = $720 (72,000 x 12% = 8,640/12 = $720)

- ARV = 115,000

I am keeping this property as a rental, rent is $1400-1500, house is in great shape the last owner kept care of the property with many updates just needs these minor fixes. I believe i could have everything done within two weeks after closing and have a renter in there within a month as its a great rental market where I am buying. 

Would you guys recommend doing cash out of your own pocket with conventional loan as that is what i am leaning towards. However my realtor suggests i do hard money so i can just wrap everything up into the loan.

Thanks everyone,

Zack