This may be an amateur question, but im going to ask it anyway. I was sent a deal that consists of 3 doors (duplex and a mobile home) fully rented that will seem to cash flow after the appropriate reserves are set aside. They want a cash offer of $128,000 for both properties.
My question to you guys is would I be able to use a hard money lender to obtain the property with cash and then refinance the property through a bank to obtain my mortgage?
Ideally I know we use hard money lenders for funding and purchasing rehabs. This particular lender though typically only charges 3 points on the front end and doesn't collect payments until the end of the loan.
Has anybody ever done this before? Open to all input and opinions.
Using a HML is Not a cash offer, it's still financed. You could also get hung if you can't refi later for whatever reason and the hml is going to want a large down payment. If you think the property is Gina cable, make a financed offer.....not everyone gets exactly what they want.
It can be done - similar to the ever-popular BRRRR model.
But there are some potential pitfalls to consider on the back-end:
- The mobile home adds rental income, but not necessarily appraisal value (in most states, they are titled as vehicles, not real estate). Will the two properties (not including the mobile home) appraise for enough to cash you out when you refinance?
- Do all three units sit on the same parcel of land? Or on multiple parcels? This can affect the feasibility of collateralizing your hard money loan, and the refi (you might need two, or three, loans instead of one, which not only increases the difficulty of getting the refi(s) through underwriting, but could mean 2-3 sets of origination and closing costs).
I agree with the aforementioned ideas. Mobile homes are not considered as the same as a home, unless it is stick build basement and came in on two pieces in some states. You really need to look into this. You will also need to know how many lots this is. If it is all on one then you will need to get it appraised. You can save yourself lots of headaches if you buy this with another kind of financing other than hard money. Hard money is good but not in this case.
If you have any other questions tag me and I will respond.
Thats exactly what im worried about-if any "hang-ups" happen with refi, it could open up the flood gates of problems I fear.
Yes, both properties sit on the same parcel.
At the current condition the duplex is in, I dont think it would refinance for the amount needed to purchase it. Not without rehabbing the inside, which would have to be until the current tenants moved out.
Both properties are on one lot. As far as financing, Im trying to find a creative alternative. If i were to go the traditional route I would need at least 20% down on it, which I dont have at the moment. Ive been pre approved for an FHA loan, but still wouldnt be able to work in this case since I would need to live in the property for at least a year.
How would you go about buying this property?
Howdy @Dennis L Lewis Jr
I think the first thing you need to do is establish a good ARV/Market Value of the Duplex/land. The Mobile Home you can use the tax assessment for value. Cash offer only will be hard for you to meet. The only thing I would suggest is asking for Owner Financing. I doubt they will go for it.
You say you don't have 20% for a traditional down payment but HML also require down payments, usually 20-30%. If you have a HML that is only going to charge you 3 points with no down payment PM me his info ASAP.
Honestly doesn't sound like a great deal if it needs a lot of work to reach full value. I don't know Tennessee but any property that has a duplex and a mobile home on it together are not going to be valued much higher than 128k