All Forum Posts by: Walter Key

Gutters. Definitely gutters.

Since the HELOC is already approved and available, the purchase would be considered a cash purchase.

Yes, identify a good lender ahead of time. Ideally a small local lender but shop around. Use the search function here on BP and you'll likely find a plethora of good lender options. 

@Ben Cohen I used those numbers as an example because 75% of $170K is right about $130K ($127,500 actually). But, there's nothing wrong with pulling more cash out of the REFI as long as the ARV can support it. Lenders are going to require about 75% LTV on a cash-out for an investment property. So, when you run your numbers out, that's about the right percentage of ARV to expect to be able to pull. So for example, let's say in this same scenario your ARV was going to be $200K. It that case you'd be able to pull $150K out, pay off the $130K HELOC, pocket $20K, and still rinse and repeat. Make sense?

Exactly this! Except, I would send it certified mail if it wasn't required. But otherwise, this advice is spot on. 

You've got the right idea. However, you're not going to be able to do a 100% LTV cash-out REFI on an investment property. So, in this scenario (with a 75% LTV Cash-out) you'd spend $130K on the purchase and rehab, then do a cash-out REFI for about...$130K which would pay off your HELOC, leave 25% equity in the investment property that is now rented and cashflowing, then you have your whole HELOC to do the same thing with again.

BINGO! That's exactly what I was going to say. If she listed the home with an agent a week or two ago, she may still have some obligations under that listing agreement. She needs to read the agreement, and any cancellation agrees carefully before moving forward with you.

Assuming all is good to go, YOU need to make sure you have a knowledgeable closing attorney that can walk you through the ins and outs of the transaction. There's a whole lot more to buying and selling real estate then just agreeing on a purchase price. 

Gotcha. 

@Troy Jaster Gotcha. Personally, I've never been a fan of all those crazy "rules of thumb". It looks like a pretty good deal to me. If you're confident in the numbers, I'd pull the trigger. Looks like a quick buck if you flip or a decent cashflow if you rent it out. What's your Cash on Cash ROI look like if you rent it out? Have you ran those numbers?

In $90K ALL their cash? I'd never recommend that dive in with all their cash. Traditionally, the HELOC is a great tool because it can be re-used repeatedly. Also, private money is expensive compared to HELOC and especially compared to cash. If I was in their shoes, I think I'd take out the HELOC and use that and/or my cash position to completely take the private money out of the equation. Done right, their ROI is going to be much better that way.

What in your mind makes it "not a perfect deal"? Granted, there's no such thing as a perfect deal. But, I just wanted to get your thoughts on the whole thing.