Decision on investing

5 Replies

Hello all, I recently obtained my real estates license and will be affiliating with long and foster. within real estate I really would like to get involved with investing and flipping properties. There is a home in my neighborhood that is foreclosed on and has been on the market for about 400 days, the property is now 90,000!!!!! Im so excited because, the property is in great condition... all it needs is a face lift (new flooring, painting, kitchen and bathrooms). BTW this property is 4/3 and over 2000sqf. Long story short. I have invested all of my saved up money into my real estate career. I want to jump on this property as quickly as possible, yet I have no money saved up... I thought about a hard money loan, contacting investors + more. Yet, im unsure how to get started. Any thoughts or ideas? Thanks

Hello Ti,

Congratulations on getting your license. Good luck in your RE career!

Financing a deal is usually one of the hardest parts. As long as the numbers work with hard money that may be your best option. My only question would be if it only needs minor work, why has it sat on the market so long? What would this home sell for when you finish? How much would the repairs cost?

Eric- Hi and thank you for your post. I have spoken with the agent whom has the listing and she simply stated that no one wants to put in the time to update this home. Its in a great neighborhood where many families with young children live. The only factor is, is that no one has the time to update this house. The comps in the neighborhood are from 200,000-250,000. I think overall id need about 25,000-30,000 to fix the house completely (that includes; updated bathrooms 3,000 each, updated kitchen 9,000, flooring in basement and bedrooms 3,000 and id re-do the deck, which would prop cost about 2,000 + room for surprises). I think that I could make a huge profit on this property. I just need the funds. Also, with a hard money loan, exactly how does that work?
Originally posted by @Eric Thomson :

Hello Ti,

Congratulations on getting your license. Good luck in your RE career!

Financing a deal is usually one of the hardest parts. As long as the numbers work with hard money that may be your best option. My only question would be if it only needs minor work, why has it sat on the market so long? What would this home sell for when you finish? How much would the repairs cost?

It depends on the lender. Many of them have different terms. You're probably looking at a 6 month term to payoff the loan, they will typically loan you purchase price plus repairs based on ARV, and interest will be pretty high. Usually you can pay a fee to extend the term if you cannot sell within 6 months. But, you could probably get 125% LTV so you would not have to use any money of your own other than, perhaps, earnest money. You may ask for some lender recommendations from investors in your area and you can see what each of them offer. Another option would be to find a local bank that is willing to offer a portfolio loan, but in my experience it would be difficult to get 100% financing, much less a loan to cover repairs. Or find an investor who is willing to partner with you. Get a written bid from a couple of contractors to verify your repair estimates. You're smart to account for the surprises!

Thanks Eric, you gave me some great advice!!!

Originally posted by @Eric Thomson :

It depends on the lender. Many of them have different terms. You're probably looking at a 6 month term to payoff the loan, they will typically loan you purchase price plus repairs based on ARV, and interest will be pretty high. Usually you can pay a fee to extend the term if you cannot sell within 6 months. But, you could probably get 125% LTV so you would not have to use any money of your own other than, perhaps, earnest money. You may ask for some lender recommendations from investors in your area and you can see what each of them offer. Another option would be to find a local bank that is willing to offer a portfolio loan, but in my experience it would be difficult to get 100% financing, much less a loan to cover repairs. Or find an investor who is willing to partner with you. Get a written bid from a couple of contractors to verify your repair estimates. You're smart to account for the surprises!

i would  not buy the agent's arguments. Do more digging on the propery. I have found that when I am just staring out on something, it is healthy to challenge my assumptions and "discount" mysleef a bit to err on the safe side. 

Have a second look at the property. Bring a good inspector and a contractor if you can. Check county records. Do as much due diligence as possible without tipping off the deal. Most of it can be done in a day or two if you can clear your schedule.

If you can fully satisfy yourself it is all kosher - press forward!

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