Delayed Financing ....... 70% LTV or 100% LTV ??

[Michael Dunn]

I'm not quite sure I understand how Delayed Financing wroks , in regards to how the LTVs work / are based on .

Example:

I purchase an Investment Property for $35,000  ( Paid for in Cash by me  )

assumes 2 sets of Closing Costs =  $5,000

Rehab = $20,000 ( paid with via a HELOC off of Primary Residence .... so technically this is Irrelevant )

Property's ARV after it's Rehabbed and Fixed up = $115,000

How would this work, when I go to do the Refinancing of this Property , using Delayed Financing  ( am assuming I get the Rehab work done in 4 months from the day I Close on it ) 

Would the Delayed Financing = 70% x the ARV of $115,000 = $80,500

So I could then take the $80,500  minus the $35,000 that I purchased the Property for with my own Cash  ( so i could FULLY pay myself back  )

I could then " Pay Off " the HELOC of $20,00 ( Plus the Interest of say $1,000 )

And Lastly I could pay off the 2 sets of Closing Costs of  $5,000

So after I pay everything off....... Would i Then " Get Back "   $19,500  in Profit  , of which I could spend in any way I like ? 

OR

Would I Only be Able to get back all of the $35,000 that I used to Purchase the Property using Delayed Financing ..... assuming 100% LTV is used of the JUST the Purchase Price of the Property ( $35,000 ) ?

Thanks so much for the help 

[Lynne Jacob]

Yes, @Michael Dunn, that's how you calculate profit. Of course, one of the #s, above, isn't FOR SURE. Your calculations of $115K of ARV are an educated guess, right? Once the property is completely rehabbed the lender/bank will need an appraised value, likely from their own appraisal (who will go low). You will then get whatever the lender allows; ie. 70% or 80% of the "appraised" value (which, ideally, will be the ARV you came up with or even higher).

Your TRUE profit will be when the house sells, but if you're keeping it for yourselves or to rent out then what ever's left over from what you financed it for after you repaid yourself for everything; ie. closing costs; purchase price; rehabbing costs, etc. is your initial profit.  Then, of course, as time passes you'll earn rent and pay expenses for the upkeep of your new property.

Hope this helps. You're spot on, except for believing (if you were) that your ARV # is what the Bank will rely on. How we wish. :-)

Have FUN with it!