Financing first deal

[Eric Ramsey]

Hello all, I’ve been listening to the podcasts, read a few books and browsing the forumns, and studying the areas I’d like to find properties. I’m going to stay local to what I know and do the buy and hold with possibld brrrr strstegy; near a university that is expanding and on the side of town with blue collar workers. So I’ve been looking for deals and two just popped up today so now it’s plunge time. Both are online auction; the first I have the only and highest bid not sure what renovation will cost estimating 30-40k on top of it costing 99k at current bid. Property has 2 apartment units and a storefront. Each apartment will rent between 900-1200 and storefront guessing 1500. The other property (condo) is auction from a deceased person (no relatives) and I’ll need to go through the proper means to store the items in the space and then be able to sell or get rid of. 1bd 1 bath for 35k the unit next door sold for 115k last year and area rents at 750-1200/month(this maybe a flip property) Limited capital for these two. I have about 30k disposable but would like to finance without any of my own money. What are options to finance? What companies have you used? Would you suggest hard money and then refi after repairs? Any advice Is appreciated, Eric

[Alex Bekeza]

Hard money for the purchase may be necessary depending on how distressed the property is but once its stabilized you could refinance into a lower interest rate, longer term commercial loan.  In either event, expect lenders to require 20%-30% of your skin in the game. 

With 30K you could find a hard money lender that would do 75%-80% LTV of the purchase as well as lend you some renovation costs which would typically be dispersed in draws. Keep in mind though most first time investors take a 5% LTV hit from lenders so 75% may be more realistic. But remember you'll need to save funds for not only reserves but closing costs which can tend to be a little higher in the form of origination charges when it comes to HML. Hope this helps a little.

 Good luck on your first deal! Looking forward to you posting the progress!