All Forum Posts by: Calvin Lipscomb

I had an investor share with me today that he uses a construction loan to purchase and rehab his properties and then converts these to a conventional mortgage. He stated he can get the construction loan for 20% down at 5% interest only each month. The kicker that I can't figure out is that he says he gets back his 20% down payment made to get the construction loan when he changes over to the conventional mortgage loan? How is he getting back his down payment for the construction from the proceeds of the mortgage loan? We are talking about a 34k purchase with an additional 8k for repairs. Total construction loan $42k

Jay Hinrichs Caleb Heimsoth maybe downsizing would be a good option. Appreciation over 5 years has been great. Maybe they could sell and buy a turnkey multi family and that could give the the income they desire. My wife and I could help with any maintenance that arises so they don't have that burden. I do property maintenance on the side as it is so nothing I'm not used to. Great feedback from both of you. And I didn't take it personally Jay. I want to make sure I do right by them. Excellent people. I lucked out getting them as family. I'd rather you be frank with me than the flip side and sugar coat or try to scam us. I am new here which is why I asked rather than try to find someone to just outright give us money and something go horribly wrong and ruin a good relationship. I truly appreciate it.

Jay Hinrichs They approached my wife and I. They're afraid right now as their savings is dwindling. They have enough to get through a couple more years then they don't know what they'll do. They were only able to buy it cash because of an inheritance. What you said does concern me though. I wouldn't forgive myself if something happened and they lost it. Thanks for the feedback.

@Etan Ofrane

14% may be a bit high, but shop around. If you have decent credit and any kind of a track record, you can get it lower. If you have no track record, you should be able to find 11-12% with a low LTV.

Also, don't worry about the interest rate and get the deal done and over with.  The difference between a 200K loan at 14% and 12% is $333 per month. Get your project done in 6 months and it cost you about 2K more than you may have wanted it to, but you're still going to net at least 60K.  No, the numbers may not be great (as flips go, saying this deal is not great is an understatement), but the house is right next to your primary residence and you can monitor the work easily saving a lot of hassle.  

What's done is done; you own the property.

Go get your hard money, get the renovation completed and take your winnings.

Stephanie

Hello everyone, 

I am interested in knowing about creative financing or even zero money down for rental properties.

I would also like recommendations on courses I can take specifically geared towards creative financing.

Thank you,

Kapil

Hi BP team,
Is anyone aware of hard money lenders that offer a HELOC, in 2nd or 3rd position lien for rehab cost only of a primary residence for conversion to an investment property?

Thanks in advance :)

I've just purchased my first deal and I'm looking to pull some cash out- I'm hoping to find tips on whether to pursue a HELOC or refi, and how to go about it. Here's the details:

Bought a SF home in Houston (Heights area) for $270K w/ 3% down loan through the Freddie Mac Home Possible Program.

It originally appraised at $280K (this was really low IMO because the comps were all smaller but sold for more than mine). Ive put about $25K in rehab (new roof, re-piped the house, total kitchen remodel).

I know this isn't perfect, but the Zillow estimate is at $368K. It should be noted that Zillow has the property incorrectly listed as a 4/1, when it is actually a 5/3 (I live in 1 room and rent out the other 4, woo-hoo!). Zillow also doesn't take into account my rehab work. The remodeled houses on my street have sold between $375K-$465K (and they are all smaller sqft).

All that to say I think I should have plenty equity in the property to pull out. I'd like to finish with 20% equity in the property (to eliminate my PMI) and use the cash to pay off my rehab expenses.

Should I go refi or heloc? I've poked around the forums, and it seems like I should go refi to get rid of PMI, but HELOC is cheaper to close...

Are there any rules against refinancing a new mortgage (I've only made 1 pmt)? And how should I go about it? I'm thinking about starting by calling my current lender to see if they can do it- is that taboo?

Sorry for the lengthy post- I appreciate any help!

I’d love to see what kinds of creative ideas anyone here might have to try and solve the problem this family I know of is having with figuring out how (or whether) to keep their parents’ house in the family. There are so many creative solutions possible in RE, I’d like to hear about which ones might work in this case. Thanks for reading and thinking about this. I’d be especially interested in anything along the lines of using a Trust, estate, or any other legal entity or unconventional solutions, or quit-claiming, or any other ideas.

Here’s the situation: the parents are retired, mid/late 70s. The parents own the house free and clear. The father is in poor health and wants to sell the house soon, so as to leave his wife with zero responsibilities regarding maintaining their house as his health diminishes. They’ve owned the home for many decades, and the mother always hoped one of their children would move into this house, the “family house”. 2 of the 4 siblings live very nearby and if moving back into the family house to keep it in the family were something they could afford today, they’d each strongly consider it. Property taxes and maintenance make it seem unaffordable for them today, but within 3-7 yrs it’s conceivable that one of the siblings could afford to move into the house. But the parents will be forced by the father’s health issues to move to an assisted-living facility sooner than that, maybe even this year. The parents do not, apparently, need the money from the potential sale of their house to be able to afford the rest of their retirement and living expenses. If they did, they’d just have to sell it, obviously. It’s unknown whether the parents would want to pursue anything other than the conventional (simply sell it). But either way, what creative ways can you think of to help them “buy time” on the decision to sell the family house?

-House is worth $1-1.4 million.

-It could rent for probably $4-5k/month easy, but perhaps up to $6k (some have suggested $8k but that seems ridiculous and would probably lead to high vacancy). Affluent area.

-Property taxes of approx $22-25k/yr plus maintenance of probably thousands per year (it’s very old), maybe approaching $10k/yr (guessing), or more.

I thought of possible solutions for this myself, and please tell me how feasible these scenarios might be.

A) Parents move out, and simply rent the house out for a few years until the siblings know for sure whether they could afford to move into it. The siblings would manage the house. Approx $40k/yr in profits (see below)

B) The parents take out a HELOC on the house, take maybe 50-75% LTV in equity out of the house( $600-750k), and use that money as a 25-30% downpayment on some kind of investment property, maybe a $2-3million convenience store / drug store property or a multi family apartment building. Or since making HELOC payments and mortgage payments on the Investment Property would make it difficult to cash flow positively overall, maybe to avoid paying 2 mortgages, just buy a $700k building that has a 8-10% Cap Rate. And the siblings would manage the property manager of the investment property. The amount of equity taken out via the HELOC, and the percentage of the downpayment for the investment property would need to be calibrated so that the profits/cash flow of the investment property (after paying its mortgage) would be enough to cover the monthly HELOC payments, the property taxes, and the maintenance of the "family house". Then they could still rent out the family house in addition to getting the cash flow from the investment property. They could still decide to sell the family house in a few years if it becomes obvious that one of the siblings will not be able to afford to live in it. Monthly HELOC payments would be approx $3500/month at 5.5%.

House Expenses:

$23k / yr Property taxes

$15k / yr Maintenance

——

$38k / yr in expenses related to the house.

+$40k / yr HELOC payments

——

-$72,250/yr. in expenses and HELOC payments

Invest in a $700k Commercial Property bought with all-cash from HELOC, producing at 9% Cap Rate

+$63k in profits.

Rent out the House

$4500/month gross rents ($54k annual)

—-

$44,750 in net profits / yr. (before vacancy)

C) Any other ideas?

Thanks a lot for your ideas!

Try Chemical Bank. Have you considered an acquisition LOC? Many finance 90% of purchase price

Hello, 

I currently have equity in my primary home that I cannot access traditionally due to crazy year after a divorce. I would like to access the funds to consolidate debt and finish rehabbing my house to rent it out. Pleeeeease advise.