4-Plex purchase w/ less than 15k OOP?

Question

Is my math correct?  i've plugged a couple examples into the calculator?  If i can purchase a distressed 4-plex for about 250k, with hard money loan and put 50k into rehab and its ARV is 230-240k  it looks like i can do it w/ less than 15k OOP after i refinance?  Has anyone ever done something similiar to this?  Is it possible to raise the value by 90k or am i dreaming?

Kevin Turano · Answer

Awesome!  Thanks!!!

Ryan Blake · Answer

@Kevin Turano

I don't think you will find a lender that will lend 88% LTV (88% of the ARV). I have seen some that say they will lend 80% LTV but then make you put down a 20% down payment on the loan amount (just so you know this is essentially getting a loan at 65% LTV). Many lenders are in the 70% to 75% range and will make you put down a 10% or less down payment, sometimes even no down payment. This would be the 100% financing you are referring to with the low out of pocket number you are looking at.

I think this same deal would work if the numbers were:

ARV: $340k

Purchase: $200k

Repairs: $50k

Then you would need to get a 100% financier that would go up to 75% LTV. Hope this helps spread some light on the situation.

Brent Coombs · Answer

@Kevin Turano, spending $50k to perhaps only raise its value by $80-90k means: it's not a good enough deal in the first place.  And, who is fronting that $50k?

ie. Are you suggesting that a Hard Money Lender will loan you 100% of the $300k?

And how are you calculating that you'd end up only being $15k OOP?

ie.  Even if your numbers are correct, you're only likely to get a Refinance of around $255k (ie. ARV x 75%).  ie.  What am I missing in your question?  Cheers...

Kevin Turano · Answer

(oops, i meant the ARV to be 330k -340k)   ( 90k increase in value)