Our background: Wife and I just had our first baby in December. She's an RN, I'm stay at home dad, handle the real-estate on the side. I'm handy, but we outsource work when it makes sense or is too big a job - think roofing/foundation/mold. We currently own 2 doubles, first one have held for 11 years and cash flows nicely. Second one we just finished the remodel and are waiting on the title company to finish our BRRRR refinance. Getting 60k cash back from the refinance.
The Property: It's a triple a 3/1, 3/1 double house with a 3/1 cottage in the back, separate structure. All utilities separate including water - 3 ways. New siding and roof. 3400 square feet total. The front house is in great shape, needs just carpet, paint and appliances for the kitchen. Rents would be $700-$800 currently for the front house. The cottage is a full gut job and has a massive mold issue throughout. I need to outsource the work on the mold and any possible foundation issues from that - water leaked in basement from an open fixture, possibly for years.
The Plan: I need to get an estimate from a reputable mold remediation company to see what the cost would be, but even at $20,000 (a hopefully high estimate) the numbers look pretty good to us. We have two options - both through the listing realtor, neither of which we have ever done or attempted. The first is having the bank selling the house to hold the paper for us knowing about the mold issue - this seems unlikely to me, they'd just go with a full cash offer instead from another source. The second is a private lender, the agent knows. We'd set up a deal for a year likely and then refinance through our bank to a 20 year loan with very good terms once the work is complete.
The Numbers: Asking Price $124,900, our potential offer $130,000-$135,000 Cash using Private Money Lender. We want to go over asking here because the Bank lowered the asking $30,000 after seeing the mold issue and we know many offers are in play. $30,000 down, estimated repairs $39,000. Total project cost ~$172,000 - ARV $180,000 - Monthly Cashflow: $588, Cash on Cash ROI 9.45%, Purchase Cap Rate: 10.45% - our area is ~8% typically.
The Questions: What kind of a deal should I look for with a Private lender/Hard money loan for 1 year. Any things I need to make sure are covered or can I just go to my RE lawyer and he'll have a pretty boilerplate contract for this situation. Does the deal even look good at this offer? Any tips on mold remediation? Any input at all is welcome and appreciated - we are just starting out and would love to get advice from people who have experience/knowledge.
Thanks in advance,
Dan and Stephanie
