Possible first deal?
Hi BP community. I was looking at a property that is going for 200K. My agent looked into it and told me that it needed a lot of major work. (roof, septic) Rehab will be around 100K. He told me I wasn't able to get a conventional loan, but might be able to go through another lender. I would need to come up with 60-70K down. Not sure if this is something I need to tackle as a new investor, or should I keep looking? The comps in the area have sold between 380K - 420K.
First question for this, is this an off market deal? I'm guessing based on your details its not, if its worth it then get a hard money lender to do a BRRRR. However 100k can get blown over budget fast, roof and septic are larger items. You have to shop for the right people. I have a roof connection but not a septic on in that are. Networking at meetups is also a great way to get help for these deals. Message me if you have any further questions.
I would be very worried about dumping $300k(+) into a property that won't be done for many months right now. What are the chances it doesn't appraise when it is done? What if the realtor missed something it and costs $150k and 6 months to finish? What do your carrying costs look like for that? How much has the area depreciated in the last 6 months? How much will it depreciate in the next 6 months? Is this a flip or a BRRRR? If BRRRR what will rates be in 6 months when you refi? I personally am not pulling the trigger on anything that isn't a grand slam for a BRRRR or a 2 month rehab on a flip. The market is too volatile to take risks when you don't have enough capital to eat $50k if you need to
@Kenneth Hadinoto Do you have any construction or rehab experience? Do you have the required capital to do it (likely 75k or more, approximately 25% of total cost)? If the answer to both is no, then pass. Using a hard money loan would be expensive, and getting a construction/rehab loan from a bank/credit union for a first timer will be very difficult to qualify for. Would I recommend a huge renovation for a first project, no. But maybe you have experience that will make sense to look into it.
I'd share the risk with an experienced rehab partner -you secure the capital. they supervise the project. other than that id worry about holding costs.