Conventional Loan vs. Unsecured Loan vs. Hard Money Loan HELP!

2 Replies

Would love to get some feedback on this strategy I just did: 

Instead of waiting 30-45 days to secure a regular conventional loan to purchase my rental property, I decided to get an unsecured loan from the bank instead. Based on my credit, income, and a few documents I had to provide they were able to get me the money in 5 business days. Here is what the numbers came out to:

$50k unsecured loan at 8% interest from Huntington Bank Purchased property for $40k- used the remaining $10k for repairs (repairs should take max of 2 months) Rent house out after repairs are done for $900-$1,000 per month
  ARV of property is $60k 53rd Bank offers 90% LTV refi after 6 months seasoning and $195 processing fee at closing- Refi property for $54k on a 30yr mortgage at 5% Mortgage payment including taxes & insurance= $436/month Cashflow= $900 - $436 = $464 gross cash flow Remove 20% for cap ex/vacancy/other expenses (round up)= $100 Net Cash flow= $364 month With the 90%LTV refi I am able to get my initial $50k back from the unsecured loan plus $4k. That $4k goes towards my holding cost for the 2 months of repairs so I am able to get into the house with minimal out of my pocket at a much quicker pace than going conventional and/or paying higher fees and interest to a HML
Would love to hear some feedback on if this is a good strategy or not. Thanks!

Ok..10K in repairs 2 months...this is way way way too long.......get it done in a week.....remember this is a rental unit..not your primary personal resident.   go with the basics....also, im sure that 53rd Bank is going to have more costs in the loan. like escrow fees, title reports, appraisal fees, doc fees, fedex fees.  KMA fees.....

Hi, @Kevin Pruitt , think your numbers are off. 20% of $900/month rent is $180, not $100. You should also figure another 10% for property management, even if you plan to self-manage. So my math:

$900 GSR
-$90  Vacancy (10%)
-$68 CapEx (7.5%)
-$68  Repairs (7.5%)
-$90  Management (10%)
-$436 PITI

=$148/month cashflow

That's not bad as per door CF.