I need help...can’t figure out if I should buy this property..

Madison · Member since 2019 · 19 posts · 6 votes

Hi everyone! I need some help...I am a newbie and I am not sure if I should proceed with this purchase. I found a home 3 beds 1 bath, approximately 1000 sq.ft, rent in the area is 781 and purchase price is 63000. The market value is from 63-68. The numbers work: however, this property is move in ready, no repairs needed. My question is, when I refinance the property, how will I get what I put in if it only refinances for 70% ARV? Granted this property does not need any repairs.

1 Reply

36 views

Most Popular Reply

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

@Daivis DeJesus you won’t be able to refinance out your down payment because you’re paying retail

4 Reply

See this reply in the discussion

16 Replies

Jump to latestLatest

Sort by

Ryan Myhre
Flipper/Rehabber · Meridian, ID · Member since 2013 · 28 posts · 17 votes
6y
Are you using cash for the purchase or using private money?
In my area and in my experience you need to buy at a significant discount with enough room to fix up what is needed. Also most banks will want 6 months of seasoning before they will refinance. The other option is to talk to other banks that will refinance at a higher ARV.
0 Reply
Daivis DeJesus
OP
Madison · Member since 2019 · 19 posts · 6 votes
6y
Thanks Ryan. I am using private money.
0 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Daivis DeJesus you won’t be able to refinance out your down payment because you’re paying retail
4 Reply
Daivis DeJesus
OP
Madison · Member since 2019 · 19 posts · 6 votes
6y
@caleb

@Caleb Heimsoth that makes sense. Thank you.
0 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
6y
780 rent on 63k plus closing is kinda marginal . I think Your looking at step 5 instead of step 1 bro
0 Reply
Michael King
Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
6y
Self managed it looks like it will cash flow $300 - $350 a month. Not bad. An approximate ROI of 30% based on assumptions of tax and insurance. 20% down is $12600. That's not the worst deal I've seen. Imagine if you had 10 of those? Would you be okay with $3k a month cash flow?
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
@Daivis DeJesus Where you get the money back on refinancing is when you buy below market value, then fix it up thereby increasing the value. Having said that, there is nothing wrong with buying a turnkey property where the numbers work. Based on what you wrote, the numbers work for this place.
0 Reply
Daivis DeJesus
OP
Madison · Member since 2019 · 19 posts · 6 votes
6y
Thank you @Theresa Harris and @Michael King I appreciate it.
0 Reply
Brandon Penn
Rental Property Investor · Erie, PA · Member since 2018 · 84 posts · 462 votes
6y
This isn't the deal for you if you are planning on refinancing. You really get your value when you buy a property that needs some rehab. Most people don't want to buy those so you can negotiate a better deal and be in a better position to refinance to pay off your private lender.
0 Reply
Natalie KolodijBusiness Member
Moderator
Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
6y
If it doesn't need any work
Why are you buying it with private money and doing a refinance?
Why aren't you just using conventional financing from the jump?
Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
Kolodij Tax & Consulting
Website View Page
2 Reply
Andres A.
Specialist · Atlanta · Member since 2019 · 88 posts · 53 votes
6y
You will not be able to refinance if you are buying at market price and the house does not need to be rehabbed. If the numbers make sense, I would use conventional financing
0 Reply
Fred Cannon
Rental Property Investor · St Augustine, FL · Member since 2019 · 265 posts · 279 votes
6y
@Daivis DeJesus. If you are using hard money and the note comes due you will be up Shiffs creek without a paddle. You should be using conventional financing and the deal works pretty good. I hope you can hold on to this deal.
1 Reply
Daivis DeJesus
OP
Madison · Member since 2019 · 19 posts · 6 votes
6y
Wao, I never thought about conventional financing...I will definitely do this. Thank you :) @Natalie Kolodij @Fred Cannon
0 Reply
Arthur Schwartz
Investor · Baltimore, MD · Member since 2019 · 168 posts · 47 votes
6y
you did not state how much of the 780 rent will go to property taxes, insurance, mortgage. As others have said this property likely works well without doing any refinancing
0 Reply
Account Closed
Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
6y
@Daivis DeJesus it meets some of the rules of thumb.
780 rent
8-10% vacancy
5-10% repairs
3-7% capex
10% property management (regardless of if you do it yourself or not)
Insurance
Property taxes
These are the numbers that matter, investing is all a math problem.
I invest X amount and get Y return after expenses. Is Y the number you want? Then proceed, if not find a new math problem, ie property.
This property is worth running the numbers at a minimum. You should be able to run the numbers in less than 5 minutes once you practice enough.
0 Reply
Michael King
Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
6y
If it meets the 1% rule you're off to a good, no great start. 63000. Anything over 630 a month is fantastic.
In my limited experience, everything that meets the 1% rule is almost a definite yes I'm buying it. Really hard to find those in better neighborhoods of St. Louis.
I have properties hitting 0.75% of the 1% rule and they are cashflowing quite nicely thank you very much.
Sounds like you're on to a good deal. The first one is the hardest.
Why don't you post all the actual numbers, taxes etc, I see you have posted percentages, which is good, but big numbers can arrive with taxes and insurance. Put those numbers up to analyze and you'll get a lot of advice. At the end of the day, it's not a hugely expensive house, and a good learning property - especially if you self PM. Good luck and stay with it, this first one is hard, no?
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.