Financing first deal

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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

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!

given that this is an auction Hard/private money or partnerships may be your only options. does the auction give you time to finance the property through conventional means or will you need to have the money at the close of the auction? Also keep in mind that buying at auction is very risky for your first deal, you don't really know what is going on in the property unless you are able to get in there and inspect it, or better yet have a home inspection done. Trying to get into your first deal with none of your own money will be more difficult considering hard money lenders will want you to have skin in the game especially considering you have no reputation or experience. Are you exploring other options besides auctions? 30K is enough for a down payment on a duplex or tripex in some parts of Cincinnati. The best bang for your buck would be to get an FHA 3.5% down payment loan on a 4-unit owner occupied building, but then you would have to intend to live there for a year.

Hey @Eric Ramsey

Would love to hear an update from you on how the bidding process ended and what you've discovered throughout the process so far. Looking forward to learning from your experience!

Also, what online auction platform are you using?

@George Boyd neither ended up working out. Price got driven up too high. After that I did find two identIcal duplexes near my house which is a campus rental area. Pretty easily I got one under contract for 130k both units are rented with section 8 at 950/unit. An identical unit was next door which I got for 87 and will take about 40k in renovations. Comps for rent for these two especially renoviated are 1000-1200/month. How I’m financing is through a special loan for investors. Put 15% down and receive loan amount and Renovation amount at 9% plus .1% origination for a 15 month loan. Will refinance once I get both rented and with the ARV of both being mid 200s I’ll pull all of my capital out within 6 months. Have two units cash flowing with equity. Then thinking spring time go and find similar deal or something that the math makes sense. What do you think?