Hi Disia,
I think that you should speak with a few key people to outline your strategy:
- Lender for an FHA loan
- Hard money lender
- Conventional lender
- Real estate agent to help comp ARV duplexes
Some of the other responses you received have some valid points, but didn't look deep enough to find creative ways to make this work. We can all give others here 99 reason why something may not work, but what about strategies (if possible) to make it doable? This is not a personal dig at anyone, but I like to focus on finding ways to make things possible.
A possible strategy using the BRRRR method may look like this:
BUY
Assuming you have no current FHA loans, you could put 3.5% down ($24,500) on the purchase price of $700K. The 2018 loan limit for high-cost (Los Angeles) is $870,225, which would cover your purchase. As I am sure you know, the Los Angeles real estate is overvalued, but forcing appreciation on this should be able to raise the value considerably. Do the math based on your own calculations compared with your agent and lenders. Assuming an ARV of $1M, and an LTV of 80%, and a repair budget of $100K:
Purchase price: $700K
Repair costs: $100K (look at private money or FHA 203K loans)
All in: $800K
ARV: $1,000,000
Here are the current loan limits on Los Angeles FHA loan:
https://www.hud.gov/sites/dfiles/Housing/documents...
High-Cost 2018 FHA Loan Limits
- 1-unit home : $679,650
- 2-unit home : $870,225
- 3-unit home : $1,051,875
- 4-unit home : $1,307,175
I think the important thing to do here is to submit an offer ASAP with an inspection contingency of a minimum of 14 days, with 45 days to close escrow. This way, you can get the property under contract and be protected to pull your money out of escrow if it won't work for you.
With 3.5% down your monthly mortgage payment: $5,214.08
https://usmortgagecalculator.org/fha-mortgage-calc...
REHAB
Speak with private money lenders, and your FHA lender before and during the escrow phase. Maybe a private money lender will loan on the property, considering that no one will occupying it during this time anyway. I would be 100% honest to avoid any mortgage fraud or calling of a loan by a lender. A better question is to find out if you can refinance into an FHA 203K or 203K streamline loan (for light rehabs), from your standard FHA. The 203K loan would provide you with the extra cash you would need to rehab the duplex. The challenge I have heard with using these from the offer stage, is the time it takes for approval. There may be a strategy, but again I would talk to multiple lenders about this.
RENT
See if the unit can be delivered vacant. If not, determine if the tenants are on a lease or month-to-month.
REFINANCE
Determine what available refinance options will work best for your needs.
I hope this helps some.
