buying, holding, and recouping my money

6 Replies

so, im getting conflicting answers from people. my question is this: if i use hard cash or private money to buy, rehab, and hold. as long as i keep my ARV under their loan threshold of 70-80%, i should recoup all the money i put into property...correct? yes....this is how green i am.

also, what is this seasoning period i keep hearing about?  i don't have time to wait a year between deals.

Excel is your friend.  Recouping your investment is a math game in the Buy and Hold world.

Initial acquisition cost 50k

Monthly profit: $500

Recoup time: 100 months

If you are talking about flips:

Initial acquisition cost 50k

Months between purchase and sale: 8

Monthly holding costs(utilities and PITI): 1000

Rehab: 50k

Total 108k

Sale Price $150k

Broker Fee 9k

Total profit: 33k

The ARV number in this case is the 150k, or whatever you can convince the lender it is. They are lending on the premise that you'll be out of the property in a timely manner, they can collect their interest payments and reinvest quickly.

Seasoning is a pleasant way of saying "I'm going to make a minimum amount on my investment."

Example:

I lend you 100k for a flip.  You've convince me the final sale price is going to be 150k.  I'm lending at 12%, no points.  I put a 6 month seasoning minimum in my contract with you that assures that I get paid at least 6k on this money.  Even if you grab a loan from another source and pay me off quickly.

Seasoning from a conventional point of view is a way to slow flippers and rehabbers down so they don't abuse programs like FHA and rural development loans. Those loans are designed for owner occupied buildings, not flippers.

Originally posted by @DeWayne Mann :

so, im getting conflicting answers from people. my question is this: if i use hard cash or private money to buy, rehab, and hold. as long as i keep my ARV under their loan threshold of 70-80%, i should recoup all the money i put into property...correct? yes....this is how green i am.

 Yes is the answer.  The seasoning period is how long the lender wants you to hold onto the property before they will refinance it for you.  Most seasoning periods are 3 - 6 months.  I can get it faster locally though.  There are probably faster refi lenders out there than the traditional ones, so keep looking if you're impatient. 

Or, you can take on a cash partner to get some of it back faster.

However, if you use hard money, you can get that loan to take them out (refinancing the HML) as soon as the rehab is done.

who wants seasoned?   if the one that lended me money to do the deal(hard money/private money) is the one, what does it matter as long as i am paying him his interest?  if the one who is getting ready to provide loan on the house(conventional), then why would he need a seasoning period?  either way, they are making their money!

all i want to do is make about a deal a month for about 5 years.  keep my properties rented, make good cashflow, keep momma happy, have a retirement.   i thought keeping momma happy was the hard part.  looking like dealing with banks is going to take her place!

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