Found a good deal, struggling to find the money
Member since 2020 · 16 posts · 1 vote
I recently found a single family home that has been fully gutted and on the same property is a triplex (they started converting a quadplex to triplex). The property needs a lot of work and repairs. Comps in the area are between 365k and 799k. I believe I can get the property to about 100k. My issue is I need about 250k - 270k all in to get it back to rentable state. At the end of the day this could be a 5 - 6 unit property with rent between 800 - 1000 a month. Close proximity to multiple universities and colleges and in a great area. My question is how do you find investors and/or financing for something like this?
@Ryan Rader, put together the equivalent of a Financing Request Packet, which is basically a packaging of the deal; describe the deal, out line the opportunity, summarize the loan terms, cost breakdown, show them the ROI, Risks, Risk Mitigation strategy, exit strategy, show whoever it is that you are a serious business man who knows the numbers and who can seriously grow their money for them. Be confident, show that you are presenting an opportunity for them, go in there as an opportunity not to be missed, not a person begging for help.
Hello @Ryan Rader Have you looked at FHA or FHA 203(k) if that's an option to consider?
Thanks Varun. I have a call into my bank to discuss. Thanks for the information.
So did some research on 203k loans. It appears you need to live at the address to qualify for the loan which is something I will not be doing. Are there other options?
Hey @Ryan Rader - I would put together a really solid deal package outlining the business plan and returns, and then make your local MeetUp rounds (probably virtual for the time being). If you have a deal, getting it in front of investors with capital and pitching it is probably your best bet. Most events have a needs/wants portion where you can present. On the financing option, you may need a hard money lender to bridge you over due to the current condition.
@David Acosta thanks for the advice. Looking at events in the area and we really dont have many. This is definitely the challenge for noobs like myself.
Get it under contract per inspection and financing contingencies. Then get some quotes from contractors. Vet the one you like and see if he wants to partner with you. If it really is that good the money will come flying to you. Good to great deals are easy to finance, just start asking. Someone will want a piece. Good luck.
Clint
@Ryan Rader, put together the equivalent of a Financing Request Packet, which is basically a packaging of the deal; describe the deal, out line the opportunity, summarize the loan terms, cost breakdown, show them the ROI, Risks, Risk Mitigation strategy, exit strategy, show whoever it is that you are a serious business man who knows the numbers and who can seriously grow their money for them. Be confident, show that you are presenting an opportunity for them, go in there as an opportunity not to be missed, not a person begging for help.
@Joanne Eriaku thanks for the info, but where do you find business men and investors. Might be a stupid noob question but I struggle with that.
@Ryan Rader
Have you remodeled a property before ? How much would you invest ? There could some opportunity for you to find a capital partner if you could persuade them with the above . Many potential investors on BP and thru meetups.
Would love to have a conversation with you about your experiences and business. Please feel free to reach out to me and schedule a call. Best of luck in all your endeavors.
@Ryan Rader What city are you in? Have you posted this in the local BP group for your city? If there's no local REIA near you, what are the 3 closest cities with active REIA groups? Most meetings are virtual right now. I've noticed that they're also FREE! Time to take advantage of that and get networking.
@Anthony Dadlani Thanks for responding. My experience has been dealing with our own house. We bought it and in essence flipped it before we moved in. To give you an idea of the extent of the projects, we ripped out the kitchen, removed a extra stairwell, moved a bedroom wall that was off the kitchen, cut concrete and added plumbing to make the bedroom a laundry room, converted the old laundry room upstairs into a bathroom for my daughter, stoned a fireplace, new flooring and carpet and ran all new electrical and piping to the new kitchen. Worked with each contractor and managed timelines and all inspection. So long story short, this would be my first investment in Real Estate outside of my own home.
I would love to have a conversation. I will send you a private message to coordinate a time.
Thanks,
Ryan Rader
@Travis Fisher thanks for the input. I live in the Charlotte, NC area. I have checked for local events (within a 100 mile radius) but none seem to be scheduled. I reached out to a couple to ask when the next event would be held. Tough with all this Covid stuff.
Before you can really start talking to Partners or Capital people, you really need to nail down the numbers of the deal first.
@Allan Smith thank you for your input.
1) For comps. The range is difficult, currently on the market are 3 buildings one is priced at $365,000 all the way to $719,000. If you look at the one that is $719,000 to me this would be the closes to the one I am looking at buying. https://www.zillow.com/homedet...
2) Currently the property is zoned RG-2 which allows for multi family residency. I am attempting to contact the county for clarification as I am unable to find it online.
3) The rent I mentioned is based on rent that realtors have given me for the area. I spoke to one today and she said we could rent out per bedroom to college student (which their are 3 colleges and universities near the property).
4) The rehab costs, the cost came from a contract who quoted $160k but I believe it will cost closer to $170k (based on my experience gutting our home).
5) My problem with finding money....I am not sure where to look. I have looked at loans and such but some of them seem unobtainable or to much red tape. Honestly I have thought about cashing out my 401k to pay cash for the property but I really dont want to take a hit with fees.
@Ryan Rader Try Lendinghome.com (they are hard money but are offering 7.95% on fix and flips) or Patchofland.com they are crowd funding, idk what they are offering. it sounds like you have a great deal on your hands, I look forward to hearing more about it as you progress!!!
@Ryan Rader, the local REIA is a lifeline when it comes to finding investors, to me that's been the most credible so far
So what am I missing??
I have spoken to several banks and other lenders today. I keep getting told that because the purchase price is less than the reno that they can't help. Also was told since the single family home is on the same property as the duplex that they are unable to help. They all agreed that the it sounds like a great deal but they are unable to help. So everyone says that if it's a good deal the money will come. I am definitely not seeing that??
So what I found out from the county zoning office was the property could only have 3 units on it. So my plans would chance a bit so in this case it would be a duplex with 4 bed/2 bath and a single family home with 4 bed/2 bath. The sqft of each side of the duplex is roughly 2000 sqft. The house is 2100 sqft. So I have check local rent in the area for 4 bed/2 bath and the rent is on average $2000/month with $1000/month being the low side and $1667 being the median.
So spoke with the sellers of the property and they are willing to work with me in regards to numbers since I uncovered the limitations of of the number of units on the property that are allowed.
So my current thinking is...Offer $70 - 80k for the property and since we do not have to renovate as many rooms I am estimating rehab being about $150k or less (have a contractor meeting me Thursday to get another quote). So all in I am looking at about $220k - $230k. The properties ARV is $365k but some properties in the area are going for somewhere around $400k - $719k. Using the biggerpockets calculator using the low end numbers the profit would be $1456/month and CoC ROI is 56.62%.
Spoke to a couple realtors in the area and they feel renting out 4 bed would not be hard with 3 Universities in the area.
So what am I missing?? I am honestly thinking about cashing out my IRA to just pay cash, but really don't want to be hit with such high fees especially when cash is so cheap.
Thanks,
Ryan
@Ryan Rader
Think outside the box. Buy it with your Ira and don’t take the penalties on early withdraw. Get the contractor to lend you the money and after it’s fixed up refinance it with a bank or sell it if you can get $799k.
I looked at Self directed IRA's but all profits have to go back into the IRA plus I am unable to work on the building per what I have been told.
So what am I missing??
I have spoken to several banks and other lenders today. I keep getting told that because the purchase price is less than the reno that they can't help. Also was told since the single family home is on the same property as the duplex that they are unable to help. They all agreed that the it sounds like a great deal but they are unable to help. So everyone says that if it's a good deal the money will come. I am definitely not seeing that??
So what I found out from the county zoning office was the property could only have 3 units on it. So my plans would chance a bit so in this case it would be a duplex with 4 bed/2 bath and a single family home with 4 bed/2 bath. The sqft of each side of the duplex is roughly 2000 sqft. The house is 2100 sqft. So I have check local rent in the area for 4 bed/2 bath and the rent is on average $2000/month with $1000/month being the low side and $1667 being the median.
So spoke with the sellers of the property and they are willing to work with me in regards to numbers since I uncovered the limitations of of the number of units on the property that are allowed.
So my current thinking is...Offer $70 - 80k for the property and since we do not have to renovate as many rooms I am estimating rehab being about $150k or less (have a contractor meeting me Thursday to get another quote). So all in I am looking at about $220k - $230k. The properties ARV is $365k but some properties in the area are going for somewhere around $400k - $719k. Using the biggerpockets calculator using the low end numbers the profit would be $1456/month and CoC ROI is 56.62%.
Spoke to a couple realtors in the area and they feel renting out 4 bed would not be hard with 3 Universities in the area.
So what am I missing?? I am honestly thinking about cashing out my IRA to just pay cash, but really don't want to be hit with such high fees especially when cash is so cheap.
Thanks,
Ryan
@Ryan_Rader you're not missing anything. You're just asking the same 1 BILLION DOLLAR question that I've been racking my brain with lately. Every time someone asks HOW/WHERE to the money question, the response is always the money is out there or go to a REIA, so they can't all be wrong ... I guess.
I'm currently looking for a "great" deal that I can put an air-tight package together for investors, so I can hit the REIA circuit and pitch/SELL it to them. We'll see how it goes.
But if you're in Columbia, I would encourage you to drive up to Charlotte and attend the Deal Makers Session. They meet every second Tuesday of the month (there's actually one tonight). You can find the event information on MeetUp.com. The meeting is specifically set up for people to pitch and buy deals, and there is a lot of out-of-state eyes in the area looking for good deals.
Thanks @Corey Edwards. I actually live in South Charlotte, So I might try to attend tonight. Some people make it seem so easy to get funding but I keep hitting road block after road block. I keep getting told that since their are 2 properties on the same parcel it makes it hard to get financing or the sell of the property is less that the rehab, so we can't help. I also get told that since this is my first commercial flip I am unable to get funding. I get the experienced piece but I do have a lot of construction knowledge and flipped the house I live in but I get they don't want to consider that. Nonetheless I do not understand the 2 properties on the same parcel piece. This is one of those deals I would be willing to partner with someone so I can make some money and gain experience.
Part of the problem Ryan may be the type of property. Anything under four units is not commercial, so it sounds like the property right now is not technically commercial, but after you make the changes and there are 5 or 6 units, then that would be a commercial property. Lenders usually focus on one category or the other, and it sounds like the property is currently in one category or type of loan product, and the work you want to do on it puts it into another loan category, or a different type of loan product.
Hello @Ryan Rader were you able to find an investor / financing on the property you mentioned? Would like to know how you closed this deal.