Financing options advice

8 Replies

I'm looking for some advice on financing for a rental property I am preparing to make an offer on.

Property details:
3/1 foreclosure listed @ $49,000
My offer = $55,000
Estimated repairs < $3,000
Estimated rent = $800 - $850
Taxes = $175/month

I have a couple of options for financing this deal and hope to get some advice on which would best fit my situation.

Option 1 - refinance and cash out on rental property I currently own out right.
Total loan = $75,000 @ 6.125% for 20 yrs - wonder if I could extend to 30 yrs?
Closing costs ~ $5,000
Take home $69,700.
Monthly payment = $542.75
This would allow me to pocket ~ $10,000 in cash that I could use as down payment on my next deal or for repairs on other properties I own.

Option 2 - Conventional loan
Loan amount = $41,600 @ 6.875 for 30 yrs
Closing costs ~ $3,800
Monthly payment = $318.28
Out of pocket ~ 15,000
This makes the property cash flow but it also takes up my cash and would most likely be forced into a refi on any future deals.

Any help is greatly appreciated.

Originally posted by Ernest Olivares:
I'm looking for some advice on financing for a rental property I am preparing to make an offer on.

Property details:
3/1 foreclosure listed @ $49,000
My offer = $55,000
Estimated repairs < $3,000
Estimated rent = $800 - $850
Taxes = $175/month





why are you offering more than the listing price?

correction - list price is $49,900

The property tax appraisal is $78,000 and CMA puts it at around $85,000. I've made offers on similar foreclosures and have lost all of them because they are selling for over list price.

Regardless if other properties sell for over list price, you need to make sure you get a good deal. Make lots of offers and close on one. That is how the game is played these days.

I also wouldn't put too much stock into the tax appraisals, although TX properties have held their own in the past few gloom years.
If the cma has TRUE comps showing a market value of $85k and the list price is under $50k, my question is, what condition is this property in?

I believe this is a good deal from an equity perspective so I'm trying to work it out so that it cash flows.

The property is in very good condition. Its very clean and has recently been painted inside. All it needs is flooring in the kitchen and I'd also like to move the washer connection from the kitchen to an outside storage that is under the carport. Because there is so little to do I am willing to be a bit more aggressive on this one.

We contacted the listing agent early in the week to get details on offer requirements and she replied with the details and also stated that there are already multiple offers and they want the best and final offer this Friday by noon.

Good luck on this one. Competing with multiple offers is usually recipe for paying too much or not being able to get the deal.

Figure out the max you can pay by clculating how the financilas pencil for you and then do not offer more than that. You really don't want to pay more and get into a negative cash flow position right?

Thanks!

I'm not holding my breath on this one. Most of these bank owned foreclosures aren't selling at big discounts.

To get the REO's like this at a discount, you must have the REO list agent contact you BEFORE it ever even gets a BPO on the property. Be there for the BPO, convince the agent of teh price it "should be in at" and then make your offer and have the agent get it in before it ever hits the MLS. Once it does, you are usually wasting your time.

Yeah..I have made about 8 offers recently on REOs and it seems they usually come back with "it sold over list"... I don't really like the idea of paying over list..even if it is listed "under market" ...It's agents trying to play a game..

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